Small Self-Administered Scheme (SSAS)
A Small Self-Administered Scheme (SSAS) is a variation of the conventional occupational pension scheme. Each SSAS is separately approved by Revenue as a tax exempt scheme. There are two trustees attached to a SSAS – the individual beneficiary and a Revenue Approved Pensioneer Trustee. Unlike traditional insured arrangements there is complete control and flexibility over the selection of investments within the structure.
The benefits of a SSAS are outlined below.
- Tax Benefits: Contributions that are made to the SSAS enjoy personal tax and/or corporation tax relief. Returns from the investments held within the trust are exempt from income tax, capital gains tax and DIRT meaning all investment growth is free from any tax interference.
- Tax Free Lump: At retirement the holder draw down a lump sum from the fund. This can be 25% of the fund as a tax free lump sum at retirement or in some cases 1.5 times final salary.
- Investment control & flexibility: One of the major benefits of a SSAS is that the holders have significant control over the type of investments held within the structure. Investments such as direct property, equities, commodities, ETFs, bonds, global funds or bank deposit accounts can be held. Lending for a property purchase within the fund is also permitted. All rental income and investment income is exempt from tax interference within the pension structure.
- Protection of funds: The assets of the scheme are held in trust for the beneficiaries ensuring that their pension benefits are protected and ring fenced against the risk of failure of their company or employer.
- Life Cover: Life cover benefits can be provided within these structures in a tax efficient manner whereby premium costs can be paid from pension fund with tax free money.
- Contributions: There is no set amount that a holder has to contribute to a SSAS annually and few rules with regard to the frequency of these contributions. There are, however, some limitations on the level of contributions that can be made to the scheme. These limitations vary depending on the individual’s age, number of years’ service, salary and if the holder has any existing pension benefits.
- Suitability: In many cases a SSAS is the most efficient and flexible way for business owner directors to fund for their future. A SSAS can also be set up for key employees and is an extremely tax efficient way to reward valued staff.
Once a SSAS has received Revenue Approval the holder can begin to make investments. However, Revenue does have two main investment prohibitions as outlined below.
1. Pride in Possession
Any investment from which Revenue believes the beneficiary receives an immediate benefit (or even where such a benefit could be made available) is prohibited. Therefore, personal items such as gem stones, jewellery, classic motor cars, etc. cannot form part of your SSAS investments. Even items that are internationally recognised as legitimate investments, such as fine wines and art, are not currently allowed.
2. Self Investment
Investments must be ‘at arms length’. The SSAS cannot have any form of commercial dealings with its beneficiary, the immediate family of the beneficiary or any business venture that involves the beneficiary. For example, in respect of property, a SSAS can neither buy from nor sell to the beneficiary, nor can rent from or to that same beneficiary, his/her family or any of his/her business ventures.