SSAS Pension vs ISA
There are many factors to consider when you’re trying to decide whether to save your money in an ISA (individual savings account) or a SSAS pension. (small, self-administered pension).
Both savings vehicles are effective long-term savings solutions that each provide their own advantages. Our SSAS pension vs ISA explanation will help you understand the differences between the two more clearly so that you can make a more informed decision.
What is a SSAS Pension?
A SSAS is a Small, Self-Administered Scheme. It is a pension specifically designed to support Directors of Limited Companies in their retirement planning. Permitting up to 11 members, SSAS is one of the best wealth management and cascading tools available. It provides significant tax advantages and also lets you cascade wealth to your beneficiaries in the future.
SSAS Pension Contributions
A SSAS pension is a pension scheme of the company. The contributions you make to a SSAS can either be made through the company, in which case you would receive a corporation tax deduction, or you can choose to make personal contributions, in which case you would receive tax relief at source.
What is an ISA?
An ISA is an Individual Savings Account. It is a popular savings and investment vehicle for many people and you can have as many ISAs as you want. ISAs provide significant advantages to individuals looking to grow their savings and save for the future.
ISA Contributions
The maximum you can pay into an ISA is £20,000. This can be paid in either a lump sum or through regular and ad hoc contributions into the account. Any interest you earn within the ISA remains free from tax.
The Benefits of ISA
Flexibility: You can open as many ISAs as you want and even choose to combine your existing ISAs into one.
No Tax on Interest: Unlike with standard UK bank accounts, should you put £20,000 into an ISA all interest earned remains tax free.
Free from Capital Gains Tax: All of the investments inside ISA are free from capital gains tax. However, there is inheritance tax. So, if you’ve got funds held in an ISA that you’ve built up over a number of years it’s worth noting that the value of the ISA funds are in your estate for inheritance tax calculation purposes.
No Tax on Income: The income you take from an ISA is not taxed. So, there are definite advantages in having an ISA. A lot of people have built up very good funds in an ISA and it has been a good servant to the British public since it came in.
The Benefits of SSAS
Corporation tax Deductibility: It is a Company that sets up a SSAS. Let’s say the Company pays in £20,000. That £20,000 contribution reduces the Company's corporation tax bill by between 19% and 25% of the amount contributed.
Tax Relief at Source: Alternatively, you can pay the £20,000 as a personal contribution, providing you have the income to cover that contribution. If you pay £20,000 into the pension scheme, you will receive tax relief at source. This means the amount will be ‘grossed up’. That is to say, the tax that was paid at source will be added back on to the amount personally contributed.
Investment Choice and Flexibility: SSAS offers a far wider choice of investments than are available in ISA. ISAs tend to only offer stocks, shares, and deposit-type funds. Whereas SSAS allows you to invest in a variety of funds. You can buy commercial property, gold, guilts, shares from around the world, loan notes, bonds, and more. There is a much wider investment remit. Find out more about investing through SSAS through our sister Company, One Crown Investments.
Multiple Contributions: Contributions into the SSAS can be made by more than one of your Companies, helping to grow the SSAS fund faster.
Discover more benefits of SSAS.
Speak to Us About SSAS vs ISA
As you can see, both ISA and SSAS attract tax relief on contributions. If you have any ISA already and you own a Limited Company, then a SSAS broadens your investment potential. Moreover, if you make the full contributions, you move very close to maximum tax efficiency. This makes a SSAS a superb long-term savings vehicle.
Our sister company, One Crown Investments can provide more information on what the options available to you are.
To discuss your options, why not book a call with a member of our team? We’d be happy to answer any questions you may have. To find out more about SSAS, visit our SSAS Video Hub.
