You really are never to young to join a SSAS
Your small, self-administered pension scheme (SSAS) doesn’t just provide death and retirement benefits for its members in a tax efficient way – It can do way more for you and your family. Due to their restriction of having no more than 11 members, SSAS schemes are often favoured by smaller businesses where the company directors, family members and senior executives are the beneficiaries. Especially as they allow for members of the family who don’t work for the company to also be included.
Not only that, but a SSAS pension is an asset that can be passed down the family through the generations. Best of all, as a pension it’s legally protected from personal or company creditors so it’s a safe place for the long-term storage of assets.
The big benefit to your family
As investments are held in the names of all of the SSAS trustees, this common ownership means that each member of the SSAS holds a specific portion of the SSAS’s assets. This makes ownership of assets like properties far cheaper and simpler to deal with than they would be if the asset were shared between three or more self-invested pensions (SIPP). The other big benefit of a SSAS, is that individuals can choose their own investments, which is really handy if the business is involved in property or land. Also, where individuals are saving in order to invest in property or land, a SSAS can really help fulfil that ambition (see my previous blog on SSAS property purchase).
What happens when a member retires?
Once a member of the SSAS retires, they have the same options as any other member of a defined contribution pension scheme. This means that you can secure a guaranteed income, take an income from the fund or a combination of the two. If the SSAS is invested in property that is generating and income, this can effectively be remitted out to the member to support their retirement.
Flexibility when it comes to your retirement day
A SSAS allows entrepreneurs to delay the time that they start retirement, as they often retire later than those in employment. It also allows for early retirement from the age of 55 years. Your SSAS will even let you carry on working part-time, receiving some pension and some income at the same time.
Tax Efficient Death Benefits
SSAS benefits payable on death are not normally subject to inheritance tax. If the scheme member dies before the age of 75, their family members can inherit their fund and take tax free withdrawals for life. After the age of 75, payments are subject to income tax at the beneficiary’s normal income tax rate. The fund can be passed down through the generations as long as it lasts. Unlike a conventional non-pension trust, there is no limitation on how long the trust can last. So the pension fund could be providing valuable benefits to multiple generations of the family of the original members. Beneficiaries are immediately entitled to draw benefits and they do not need to wait until they are at least 55.
Other benefits of SSAS to family businesses
Your SSAS can also be a great way to increase your purchasing power, if you’re looking to accrue assets for the future. Please see my previous blogs on using your SSAS to borrow funds for property and stock purchases.
Get it right from day one
With something as complicated as a SSAS, it’s vitally important that you get the right kind of professional advice from a qualified and expert financial adviser who knows this area well. The wrong advice, or no advice at all, could result in significant tax penalties.
As always, we at Bridgewater Financial Services are here to provide expert and independent advice on any questions you have regarding A SSAS pension, or any other financial enquiries you may have.