SSAS: how a niche pension product is bolstering small businesses
Small business owners struggling with the effects of the Covid-19 pandemic are increasingly turning to a novel type of pension plan that gives them much-needed flexibility.
Small self-administered schemes (SSAS), a niche product designed by HM Revenue & Customs more than 40 years ago to meet the needs of directors of family-run business, have enjoyed a surge in popularity since the pandemic began.
These schemes offer the same tax breaks on savers’ contributions as other types of private pension scheme, but boast a broader range of investment options. In particular, directors can use the schemes to invest in property on behalf of their companies: buying the firm’s office or manufacturing facilities, for example. The schemes are also entitled to provide loan finance back to the business, subject to strict rules on the proportion of the pension fund lent, secured against the property it holds.
This loanback facility is a particular attraction of SSAS arrangements in the current trading environment, where many small businesses are suffering liquidity and cashflow problems because of Covid-19. Financial advisers warn that it is crucial for directors not to enter into such arrangements lightly, or without taking expert guidance, since schemes making loans in this way are effectively putting the directors’ retirement finances at risk. Nevertheless, in the right circumstances an SSAS could provide viable businesses with a short-term cash lifeline.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Other advantages include the fact that employers’ contributions to SSASs are deductible against corporation tax and that the schemes are allowed to hold up to 5% of the company’s shares as part of their investment portfolios.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.
-
RICS: Housing market continues to strengthen but 2025 could be challenging
The latest survey by the Royal Institution of Chartered Surveyors reports a resilient UK housing market, but warns of headwinds next year
By Ruth Emery Published
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published