What Is A SSAS Pension? All You Need To Know

Table of Contents

There are several types of pensions in the UK and a small self administered scheme (SSAS) is one of them. So, what is a SSAS pension? 

In this guide, we run through the basics of everything you need to know about SSAS pensions including how they work, their advantages, who can set up a SSAS and their rules and regulations.

So, what is a SSAS pension scheme? Fundamentally, a SSAS is a type of workplace pension for small businesses and is a very flexible pension option for small business owners.

Read on for our full guide to SSAS pension schemes, or use the links below to skip ahead.

Written by a finance professional.

This article is written by Alex King ACA who is a Chartered Accountant, and has been reviewed by Dominic Durdle FCCA who is a Chartered Certified Accountant. Although this article is written by a qualified professional you should seek individual advice if you’re unsure of your options or financial position. We recommend Unbiased, who will connect you to a regulated financial advisor, including a no-fee initial consultation.

Types Of Pension

There are 3 types of pension in the UK: personal pensions, workplace pensions and the state pension

Both personal and workplace pensions are types of private pension. This differentiates them from the state pension, which is funded and administered by the government.

There is no limit to the number of private pensions you can hold and many people will have at least one workplace or personal pension. 

Private pensions do not affect your entitlement to the state pension – this is decided by your national insurance contributions up until the state pension age. This is currently 66 for men and women but will be gradually increased to 68 for those born after 5th April 1960.

Generally, private pensions can also be split into defined contribution or defined benefit schemes. Workplace and personal pensions can be defined contribution schemes, whereas defined benefit schemes tend to only be workplace pensions.

Workplace Pensions

Sometimes known as occupational pensions, a workplace pension is arranged by an employer for its employees. 

A few years ago, the government made it compulsory for most employers to automatically enrol their employees onto a workplace pension scheme. So if you start a job now you will likely join a workplace pension scheme without having to do anything yourself to set it up. 

Your employer will pay into the workplace pension for you and you may also make additional contributions from your pay. You can usually change your level of contribution, though, to suit your needs.

Any contributions you make will receive basic rate tax relief automatically. If you’re a higher or additional rate taxpayer then you can claim additional relief on your annual tax return.

A small self administered scheme pension is one type of workplace pension, commonly seen with small businesses. We’ll see why that’s the case next.

So, What Is A SSAS Pension Scheme?

A SSAS pension is a type of defined contribution workplace pension that can be set up by a small business, usually a limited company, and typically for the benefit of its directors. It can have no more than 11 pension scheme members.

The business itself is known as the ‘sponsoring employer’ of the scheme and makes contributions to the SSAS fund. The scheme members, such as company directors, can also make contributions to the scheme.

As with other types of pension, if you’re a scheme member then you will get basic rate tax relief on any contributions. If your SSAS is registered for Relief at Source with HMRC then you will automatically get basic rate relief. Additional tax relief can be claimed directly from HMRC for higher rate and additional rate payers.

One of the major benefits of a SSAS pension is that your company’ contributions are also normally eligible for tax relief as business expenses. So, if you’re the director of a limited company you can get tax relief on both your company’s contributions and your individual contributions.

But, there are some rules around SSAS pensions which we take a look at next.

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SSAS Rules

There are some rules that SSAS pensions must comply with and common practices that are not required but are usually seen with a SSAS.

Sponsoring Employer

A SSAS is a workplace pension and requires a ‘sponsoring employer’ to set up the scheme. There’s no legal requirement for the sponsoring employer to be a private limited company but it almost always is.

Partners in a limited liability partnership, for example, would not benefit from a SSAS as they are not considered employees. Similarly, if you’re a sole trader then you’re self-employed and cannot benefit from a workplace pension such as a SSAS. 

It’s possible for there to be more than one sponsoring employer. If you want to have more than one then it must be demonstrated that the other sponsoring employer will also contribute to the pension scheme and is in some way related to the trustees of the scheme.

Scheme Administrator and Registering With HMRC

The scheme must be registered with HMRC and requires a Scheme Administrator who must pass a ‘fit and proper persons’ test. Typically, a Scheme Administrator is also a trustee of the pension and it is common for those wanting to set up a SSAS to use the services of a Professional Trustee who acts as the Scheme Administrator.

Trustees

If set up in a trust structure, the scheme will have trustees who oversee and make decisions around the SSAS pension. These are appointed by the sponsoring employer.

Pension scheme members are usually also trustees of the scheme. However, a Professional Trustee may also be present, who acts as Scheme Administrator and will not be a member or beneficiary of the scheme.

Members

Scheme members are those who pay in and benefit from the pension. As mentioned above, they will often also be trustees of the scheme. A Professional Trustee, however, will not be a member of the scheme.

SSAS Contributions

Once set up, the sponsoring employer can then make contributions to the scheme. These will effectively be payments to the trust established for the scheme.

Employer contributions are paid in gross and can often be claimed as business expenses – but you should check whether this is the case with your accountant and HMRC. 

Members can also contribute, including via salary sacrifice, up to their annual allowance limit. 

If the scheme registers for ‘Relief at Source’ with HMRC, then any contributions made by members will get basic rate tax relief automatically. Otherwise members must claim relief through a self assessment form. This also applies to members who are higher rate and additional rate taxpayers.

Beyond these rules, it is up to the trustees to decide any other rules on the pension scheme so long as they are allowable by HMRC and pension law. These can be set out in the trust deed of the SSAS, assuming a trust structure is used.

How Does A SSAS Work?

In many ways, a SSAS works like any other workplace pension. The employer, or in the case of a SSAS the ‘sponsored employer’, makes pension contributions into the SSAS fund.

These are usually allowable business expenses and will reduce the company’s corporation tax bill. 

At the same time, the members of the pension scheme can also make contributions into the fund. These contributions can also get tax relief but not all SSAS pensions will be able to deduct basic rate relief at source, so typically employees may need to claim all income tax relief through a self-assessment form.

It is possible for the SSAS to register for the ability to apply basic rate tax relief at source, but not all SSAS schemes will want this extra administrative burden.

The funds within the SSAS can then be invested as the trustees see fit, subject to HMRC rules and pension law.

What Can a SSAS Invest In?

One of the major selling points of a SSAS pension scheme is the wide range of options that they are able to invest in. 

Investments include, but are not limited to, the following:

  • Funds and equities, including:
    • stocks and shares
    • investment trusts (excluding those holding residential property)
    • ETFs
    • mutual funds
    • international equities
    • AIM listed shares
  • Corporate and government bonds
  • REITs
  • Unquoted UK equities, including shares in the sponsoring employer (may be subject to conditions and limits)
  • Gold (must be investment grade gold bullion)
  • Interest bearing deposit accounts 
  • Commercial property (HMRC rules apply)
  • Secured commercial loans – the SSAS scheme can loan out its funds to either the sponsoring employer or unconnected (defined by HMRC) UK companies
  • Structured products

It’s also possible to invest in more bespoke investments, but these will need to comply with HMRC’s rules and pension laws. Not all SSAS pension administrators or trustees will agree to facilitate the less common types of investment.

As you can see, though, SSAS schemes are able to invest in a wide range of assets and investments. This makes them an attractive option for small business owners who want flexibility and control over their pension scheme.

You can also use SSAS pension funds to purchase shares in the sponsoring employer, provided certain conditions are met. In effect, this means you can raise equity in your own company via your pension scheme. Again, this is a complex area and you should seek professional advice if you’re interested in exploring this.

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SSAS Loans & Borrowing

As we outlined above, a SSAS pension fund is able to lend out the funds in the form of loans. These can be both to the sponsoring employer or to unconnected companies, effectively making the fund a commercial lender.

It cannot, however, make loans to pension scheme members. So as an individual member of your pension scheme you cannot borrow funds from the pension scheme. This goes against the principle of accessing your pension only in retirement which is at least the age of 55 (57 from 2028). 

For more on pension borrowing, read our pension loan guide which also covers SIPP loans.

If you have a SSAS, the ability for your company to borrow funds from the pension scheme can be an attractive way to fund your business. However, the loan must be on a commercial basis – you cannot give your business preferential interest rates. 

HMRC defines the interest rate as 1% above the the average of the base lending rates of the six leading high street banks specified in the regulations:

  • The Bank of Scotland
  • Barclays Bank
  • HSBC Bank
  • Lloyds Bank
  • National Westminster Bank
  • The Royal Bank of Scotland

In this way, you can both fund your business and generate a return for your pension at the same time. There are strict criteria set out by HMRC, in addition to the interest rate conditions above, that must be met in order for a loan to a sponsoring employer to be made. 

SSAS pension funds are also able to borrow money so long as the loan is used for the benefit of the scheme. Typically this means borrowing money to fund the purchase of an asset, such as commercial property. 

It’s not uncommon for business owners who operate a SSAS to get a SSAS loan to fund the purchase of their commercial premises. The SSAS then owns the commercial property and leases it back to the business. 

By doing this, the business is able to raise cash and the owner of the business retains control of the commercial property through their pension. The SSAS then receives rental payments as pension income. These must be on an arm’s length basis and there are implications from essentially becoming both landlord and tenant of a commercial property.

For complex transactions involving pension loans and commercial property, you should seek professional advice.

When Can I Access My SSAS Pension?

The rules for accessing pension benefits from a SSAS are usually no different from any other private pension scheme – from the age of 55 (57 from 2028). 

However, the SSAS can set its own rules on accessing benefits so long as all members/trustees agree and the age at which the pension can be accessed is at least 55. So it could, for example, set the age to be greater than 55.

Are SSAS Pensions Safe?

In the UK there are a number of safeguards in place for private pensions. They vary according to the type of pension.

SSAS are classed as workplace pensions and have a sponsoring employer. Typically, they are set up as a trust and will have a professional trustee who may act as administrator of the scheme. You should check that your pension trustee is registered with The Pensions Regulator.

The Pensions Regulator is the independent regulator of trust-based and defined contribution pension schemes in the UK. 

You can also complain to the Pensions Ombudsman if you are unable to resolve a dispute involving a private pension with any of the scheme’s trustees, the employer, administrators or managers. This includes SSAS pensions.

It’s also important to check that any pension provider you may use with your SSAS is registered with the FCA or authorised by the PRA in the case of insurance companies who provide annuities.

Any investments made, such as in shares or funds, should be with an FCA regulated broker which has FSCS protection. Usually the FSCS protection provides you with up to £85,000 in the event of a firm going bust but, in some cases, there is no limit to the compensation you may receive when it involves a pension.

If you receive pension advice, ensure that it’s from an FCA regulated advisor. In the event that you receive bad advice, you can complain to the Financial Ombudsman Service, whose rulings are binding.

How To Open A SSAS

You’ll normally need to have a business registered as a private limited company to act as sponsoring employer for the SSAS. 

To set up a SSAS you will need to register the scheme with HMRC and choose how to structure it. You should consider using a professional pension administrator / trustee who can set up, register and provide administration of the SSAS. 

You must provide them with all relevant information and they will set up the trust for you and register the scheme with HMRC. As a professional trustee they can then manage the administration of the scheme for you. The scheme may also need to be registered with the Pensions Regulator.

The SSAS can be either a pooled scheme where all members’ contributions are put together to invest as a single fund, or they can be kept separated. If kept as a pooled fund, each member’s share is based on their contributions. When kept separate, each member has their own mini-fund within the pension fund. 

You can also transfer existing pensions to a SSAS, but you should get advice from a qualified financial advisor before doing so.

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What Happens When You Retire?

When you reach 55 (57 from 2028), or older if decided by pension trustees, you’re able to take your pension benefits in the same way as with other personal or workplace pensions. 

You’re entitled to a lump sum withdrawal of 25% of the pension value tax-free if you want to. Alternatively, you can withdraw funds from the pension as income, the first 25% of which will be tax-free.

Any withdrawals after the first 25% of the value of the fund will be subject to income tax at your marginal rate, after taking into account your personal allowance.

The situation is slightly more complicated for those with larger pensions. Previously, there was a lifetime allowance charge on those who had combined pensions worth £1,073,100 or more. From April 2024 this charge will be abolished, but income tax charges may still apply if the lump sum you take when accessing your pension exceeds £268,275, which is 25% of £1,073,100. 

Pension planning can be complex and we recommend you speak to a professional, regulator financial advisor about your options.

What Happens To A SSAS on Death?

If set up as a trust, which is the case with most SSAS pensions, it’s possible to pay benefits or transfer assets to the member’s nominated beneficiaries upon the member’s death. This usually is not subject to inheritance tax.

It’s important if you’re a member of a SSAS pension scheme to formally nominate a beneficiary, as the trustees of the scheme must take this into account when deciding who to distribute benefits to after your death. 

For example, if the SSAS owns commercial property it’s possible for the scheme member to pass this on to a spouse, children or grandchildren without paying inheritance tax. In this way, property is able to stay in your family’s hands for generations without being subject to inheritance tax. This does not apply to residential property.

However, this can be a complicated area of tax and pensions law. Even where inheritance tax is not due, benefits which pass on to a member’s beneficiaries after the member’s death may be subject to income tax.

We recommend you get advice from a qualified financial advisor to discuss your options around retirement planning, pensions and inheritance.

SSAS Pensions – Final Word

So, back to the question – what is a SSAS pension? In short, it’s a workplace pension set up by small business owners for the benefit of no more than 11 members, who are usually directors of the small business.

SSAS pensions are very flexible, come with a number of potential tax advantages and have a wide range of investment possibilities. These include investing into the business itself, as well as making loans and being able to borrow money to fund asset purchases.

They are often complex schemes to set up and run, so you should seek professional advice from regulated financial advisors and your business accountant. It’s often a good idea to use a professional trustee to administer the SSAS pension for you and your business.

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If you’re unsure of your options or financial position you should seek professional advice. Unbiased has over 27,000 financial experts – simply enter your details and they will match you to the best financial advisor for your needs, including a no-fee initial consultation
Find qualified, independent and regulated finance professionals.
If you’re unsure of your options or financial position you should seek professional advice. Unbiased has over 27,000 financial experts – simply enter your details and they will match you to the best financial advisor for your needs, including a no-fee initial consultation

SSAS FAQs

How does a SSAS pension work?

SSAS pensions are set up by small businesses for the benefit of no more than 11 members, who are usually directors of the business. They have a wide range of investment possibilities and potential tax advantages, such as the ability to use the pension fund to invest in and make loans to the business itself.

What are the disadvantages of SSAS pensions?

A SSAS pension can only be opened by employers, usually private limited companies, and are limited to a maximum of 11 pension scheme members, so they are not available for everyone. 
All decisions require the agreement of all the trustees/members, unlike a personal pension/SIPP which you usually have individual control over.

What is SSAS and how does it work?

SSAS stands for small self administered scheme, and is a type of workplace pension usually setup for the owners of a small business. It’s limited to no more than 11 members and has a lot of flexibility compared to other types of pensions. There are a wide range of potential investment options, including into the business owner’s company.

What is the difference between SSAS and SIPP?

A SSAS scheme is a type of workplace pension whereas a SIPP is a personal pension. Self administered small schemes (SSAS) must have a ‘sponsored employer’ whereas any individual can set up a self-invested personal pension (SIPP). Generally, SSAS pensions are able to invest in a broader range of investments than a SIPP but they require a sponsoring employer to set up the scheme.

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