The Small Self-Administered Scheme is an attractive alternative to the traditional company scheme, says wealth management specialist Tony Byrne.
WE HAVE all heard the phrase “My business is my pension”. But is it really? The answer in most cases is no, especially if it is an owner-managed small or medium-sized enterprise.
I once read a statistic which really resonated with me. It was that nine out of ten businesses fail in the first ten years. Of the remaining 10%, nine out of ten will not survive the next ten years either. So that means that on average only 1% of businesses last 20 years or more.
So what should you do about it? Well, the obvious thing to do is to create a company pension scheme for the directors, owners and possibly the senior management of your SME.
You will of course already have a workplace pension scheme in place under the auto enrolment rules.
If you have left it late to build up your pension, you may well be restricted in terms of the amount of money you can contribute into a pension scheme because of HM Revenue & Customs’ annual allowance rules.
However, most people are not aware of the benefits of what is known as a defined benefits Small Self Administered Scheme – a SSAS – which is designed for SME owner managers and has unique advantages over money purchase or Defined Contribution schemes.
I have listed below some of the benefits of a SSAS compared to DC schemes.
Boost funding and larger contributions
- Allow the catching up of lost years’ pension contributions including carry forward;
- Accumulate larger pension funds over a shorter period;
- Assist funding for a specific investment such as commercial property purchase;
- Offer a solution to those who have contribution limits due to the tapered annual allowance and/or the Money Purchase Annual Allowance.
Invest in clients’ own business
- Funds in the scheme can be pooled with up to 11 employees to assist with investment gearing;
- The scheme can purchase a wide range of investments including shares and commercial property;
- Loan back to the company;
The scheme may borrow a further 50% of its net assets for investment.
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