Let’s take a look at the key differences between small self administered schemes (SSASs) and self invested personal pensions (SIPPs).
What is a Self Invested Personal Pension (SIPP)?
A self-invested personal pension is a scheme, regulated by the FCA, that offers a wide choice of investments and flexibility around retirement planning. Anyone is permitted to take out a SIPP, providing they meet the eligibility requirements.
A SIPP is set up by a specialist SIPP operator, with a trustee company as the main trustee. Each client who becomes a member of the SIPP will have an individual account where they can make their own investment decisions in accordance with regulations.
What are the Benefits of a SIPP?
Used wisely, a SIPP could help you grow your retirement savings giving you access to greater returns and more financial freedom in the long term. Other benefits include:
- A wide range of investment opportunities
- Basic tax rate relief at 20%
- A high level of transparency and control
- Potential for higher returns on your investments
- Leave your SIPP to the people you choose, tax free under certain conditions
What is a Small Self Administered Scheme?
A small self-administered scheme (SSAS) is a pension scheme for Company Directors who want more financial control. Importantly, a SSAS provides business directors with more control over investment decisions, allowing them to invest their pension funds back into their business.
What are the Benefits of SSAS?
- Flexible retirement planning
- Investment control
- Commercial property investment
- Loans back to the Company
- Tax efficiency
- SSAS fund pooling for higher purchasing power
SIPP and SSAS Pensions: The Key Differences
While both SSASs and SIPPs are both tax efficient ways to grow your retirement fund, they are designed to cater to the very specific saving needs. Here are the key differences.
Small Self Administered Scheme (SSAS)
Only Available to Company Directors: SSAS pensions are only available to Company Directors of small to medium sized companies. The Director can add up to 11 members to the SSAS, however we recommend these members are limited to family only. Co-Directors or senior members of staff are generally advised to set up their own SSAS.
Wide Investment Opportunities, Flexibility and Control: SSAS offers the opportunity to invest in a wide range of investments, most notably commercial property. Investing inside SSAS has a number of tax advantages, helping to grow your business and your pension fund simultaneously. Speak to our sister Company, One Crown Investments, to learn more.
All SSAS Members are Trustees: this means that everyone has to work together within the SSAS to make decisions for the benefit of the fund. Each member will own a percentage of the fund itself, however decisions from what to invest in to when to withdraw funds must be collectively agreed upon before they can be actioned.
Ability to Lend Funds to the Company: one of the most attractive features of a SSAS is its ability to loan funds to the Company. This can provide your company with the funds it needs to grow and acquire assets such as commercial property. Loans to the Company is a unique feature of the SSAS and one that is extremely popular among Company Directors.
Self Invested Personal Pension (SIPP)
Available to Anyone: anyone can open a SIPP and start saving for retirement. However, SIPPs are a self-invested pension plan, meaning you’re in control of the fund and how it’s invested. As such, it is generally recommended that you have some investment knowledge so that you can manage your funds appropriately.
A Personal Pension Scheme: A SIPP is a pension scheme for the individual that can be set up independently of employment. Unlike a SSAS which is run by its members, a SIPP is run by a personal pension scheme and managed by the individual holder.
Higher Running Costs: SIPPs generally have higher running costs than SSASs. This is because SIPP providers often charge a percentage of the total held within the SIPP. Therefore, the more you have in your SIPP the more it costs to run.
SIPP vs SSAS: Investing
Quite simply, a SSAS offers more investment flexibility than a SIPP. This is because a SSAS can make investments to the sponsoring employer. SIPPs, while offering a broad range of investments, cannot loan to the sponsoring employer.
If you would like to discuss investing through a SSAS, please speak to the team at One Crown Investments who will be able to talk you through the available options.
SIPP vs SSAS Pension: Which One is Right for You?
Here are a few things to consider when choosing between a SIPP and a SSAS:
A SIPP could benefit you if:
- You’re happy to manage your pension yourself
- You want to consolidate your older pensions into one
- You want access to a wide range of investment options
A SSAS could benefit you if:
- You are the Director of a Limited Company
- You are willing to share control of the SSAS with family members or fellow directors
- You’re looking for a cost-effective way to borrow money
- You want to buy commercial property in a tax-efficient manner
- You want to pool your pension savings with other members to increase your purchasing power.
Speak to a Member of Our Team
If you’re planning for your retirement and you want to invest your money wisely, book a call to speak with a member of our team. We’d be happy to answer your questions and share how SSAS could be the solution for you.
To discover why SSAS is the go-to for Business Directors, visit our SSAS Video Hub.
