SSAS or SIPP (78)
by Roderick Ramage, solicitor, www.law-office.co.uk
first published by distribution to professional contacts on 12 April 2021
This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.
SSAS (small self-administered scheme)
SSAS remains the popular term for the type of scheme defined as such in the
(a) it is an occupational pension scheme, as defined in the Pension Schemes Act 1993, s1;
(b) it has fewer than 12 members; and
(c) all its members are trustees of the scheme and either
(i) the provisions of the scheme provide that all decisions which fall to be made by the trustees are made by the unanimous agreement of the trustees who are members of the scheme, or
(ii) the scheme has a trustee who is independent for the purposes of of the Pensions Act 1995
(with corresponding requirements for directors of a company which is the sole trustee of the scheme).
SIPP (self-invested pension plan)
A SIPP is a personal pension scheme defined in the Pension Schemes Act 1993, s1 as a pension scheme that
(a) is not an occupational pension scheme, and
(b) is established by a person with permission under the ().
At its simplest a personal pension scheme is a contract between an individual and an insurance company or other provider. An employer is not party to a personal pension scheme, but may and usually does contribute to them and might organise the provision of personal pensions through a grouped personal pension plan (GPPP).
similarities and differences
establishment and registration
An employer, which (or who) can be anybody, may establish a SSAS, and the SSAS’s trustees must then register it with HMRC. A SIPP may be established only by person with permission under the
Three differences between a SSAS and a SIPP are that:
(a) a SIPP does not have an employer, and if an employer contributes to it for the benefits who is a member of a SIPP, it does so not under the SIPP’s terms but member’s the member’s terms of employment;
(b) a SSAS holds its assets collectively for all the members, so individual members have only a notional interests in them or any part of them, but assets held in a SIPP are held for its member; and
(c) a SSAS may provide defined benefits.
Member and employer authorised payments are listed in the FA 2004, s160 and s175. Unauthorised payments are not prohibited, but are subject to tax charges.
By the FA 2004 s161(5) a payment by a registered pension scheme to or in respect of a person who is connected with member or former member or a sponsoring employer connected with such a person, is treated as made to the member or former member or sponsoring employer.
investments - general
In general the trustees of a SSAS may make any investment that they select, but the range and type of investments that may be held in a SIPP might be restricted by the provider. Both are investment regulated schemes subject to the FA 2004 s174A and sch 29A (see my taxable property update of 14/10/20).
employer related investment and loans
A SSAS, as an occupational pension scheme, is subject to more than 5% of their investments in employer-related investments and any of their investments in employer-related loan. These restrictions do not apply to a small scheme, which therefore may hold employer related investments and make loans to the scheme employer. Loans to the scheme employer are taxable unless they are “authorised employer loans” under s179 (see my borrowing and lending update 17/10/18).egulation 12 of which prohibits occupational pension schemes from holding
By s171(4) a loan by a pension scheme (SSAS or SIPP) to member or former member is not an authorised payment.
A payment to acquire shares in the scheme employer is taxable if the market value of the shares acquired is 5% or more of the market value of the scheme’s investments or the total value of the shares held by the scheme is 20% or more: FA 2004 s180.
As a SIPP is not an occupational scheme neither
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