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Defined Contributions: Small self-administered pension schemes (SSASs)

A small self-administered scheme for pensions is a type of employer-sponsored defined contribution workplace pension. These can give the employer additional investment flexibility.

How small self-administered pension schemes work

Small self-administered pension schemes (SSAS) are generally set up to provide retirement benefits for a small number of a company’s directors and/or senior or key staff. They can be open to all employees and their family members, even if they don’t work for the employer. The number of members is generally no more than 11.

Insurance companies and other pension providers may offer SSASs. An SSAS is run by its Trustees, who may often be the members of the scheme.

Contributions may be made to the small self-administered scheme by the members and/or the employer. Each receives tax relief on contributions made, subject to certain conditions.

The benefits

A major benefit of SSAS is that it can offer the employer increased flexibility on where the scheme’s assets can be invested. This can include investing in assets that aren’t generally available for many other types of scheme to invest in. As an example, an SSAS is able to purchase the company’s trading premises and lease these back to the company. It may also, subject to certain terms and conditions, lend money back to the company and purchase the company’s shares.

An SSAS can also borrow money, subject to terms and conditions, for investment purposes. For example, the SSAS may raise a mortgage to assist with the purchase of the company’s premises by the scheme. The mortgage repayments may then be covered, in all or in part, by the rental income that the company pays the SSAS.

All of the SSAS’ assets are held in the name of the Trustees – there are no ‘individual pots’ for each member, although each member is deemed to hold a proportion of the scheme’s assets.

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