Contributed by MW Pensions
12 November, 2013
Contributed by MW Pensions [www.mwpensions.co.uk]
This Newsletter is intended as technical support for financial and other professional advisers. Members of the general public should not rely upon it
SSASs and their servicing
Small Self-Administered Schemes (SSASs) are often forgotten in favour of SIPPs. But sometimes they may be more appropriate.
In addition there are many historic SSASs out there, set up typically in the 1980s or 1990s and in many cases they are not being well looked after by their current administrator – not least because in most cases the firm that set up the SSAS will have been sold or taken over in the intervening years. We offer a high quality SSAS administration service at a competitive price – more about that later.
How is a SSAS different to a SIPP?
Fundamentally a SSAS is a standalone scheme, usually (but not necessarily) with an associated employer. A SIPP is a personal pension
What about trustees?
A SIPP is effectively part of a "Master Trust" and with some SIPPs the member is also a trustee and in others they are not a trustee. In the MW SIPP 2 it is the latter, with MW SIPP Trustees Ltd being the sole trustee.
In a SSAS, all the members must be trustees. It is preferable to also have a Professional Trustee, as otherwise HMRC are likely to consider the scheme to be "high risk" and take an interest in it. Indeed HMRC have made their concerns known about SSASs with no professional Trustee.
Who can be a member?
Basically anyone in the UK can have a SIPP and there is no minimum age – so a SIPP could be set up at birth.
Because, in a SSAS, all members must be trustees, the minimum age for membership in a SSAS is 18 (the lowest age at which someone can be trustee under Trust law).
In a SSAS, even if there is a sponsoring employer, members do not need to be employees to join the SSAS.
What about the legal aspects?
A SSAS has its own personalised documentation i.e. its own Trust Deed and Rules. A SIPP is just part of an overall Trust Deed that covers all the members of that SIPP.
What about reallocation of benefits between members within a SSAS?
This is not allowed under HMRC rules.
What about investments?
In most areas there is no difference. The areas of difference are:
- a SIPP cannot loan any monies to any connected company, whereas a SSAS can loan up to 50% of its assets to a connected company on normal commercial terms and providing certain defined HMRC requirements are met. Neither a SIPP nor a SSAS can loan money to the member;
- a SSAS is limited to 5% of its assets being invested in unquoted shares of a connected company. A SIPP has no restriction, though care is needed with investment in unquoted shares.
One other advantage of a SSAS is that it more easily allows co-mingling of the underlying investments. This can make investing in commercial property, say, a little easier, as with a SIPP each SIPP would be a separate purchaser and there would be a need for a legal Syndicate agreement between the different SIPP members. This is not the case with a SSAS.
There are no differences in IHT treatment between SSASs and SIPPs.
What about costs?
We can only talk about our own fees. The annual fees for a SSAS are £950 (£1200 if trustee services are provided via Specialist Trustees Ltd). For a full SIPP the annual fees are £600. So for 3 people eg. husband, wife and son, a SSAS is cheaper going forward. However, the set up fee for a new SSAS is considerably more than for a SIPP. VAT is additional on all our fees.
Because a SSAS has its own personalised legal documentation, the ongoing costs of keeping up-to-date with the legal requirements will be higher.
What about us taking over the administration an existing SSAS?
We are quite often approached by advisors asking if we could take over an existing SSAS. This is usually because either the existing administrator is giving poor service and/or their fees have escalated.
We make no charge to take over an existing SSAS – our philosophy is that the client will have already paid an original set up fee, so why should we make a further charge for taking it over. We just charge our normal annual fee, in advance. That’s £1200 + VAT, assuming we will be required to provide Professional Trustee services as well.
The only extra costs that might be incurred are:
- any transfer out fee charged by the existing administrator
- if there is a property, there will be a cost in changing the name of the Professional Trustee on the Land Register, which will need to be done by a solicitor.
Gilt Yield for Drawdown
The gilt yields to be used for drawdown calculations are:
We do not give financial advice and no comments here are intended as such. The above information is based on our understanding of the legislation governing pensions at the time of writing. Before taking any action you should consult a qualified financial and/or tax adviser. Levels, bases of and reliefs from taxation may be subject to change.
This Newsletter is intended for professional advisors only, not members of the general public
Authorised and Regulated by the Financial Services Authority
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