How to set up a SSAS pension scheme

If you are a businessman with ambition, you may sometimes feel stuck in the slow lane, especially when it comes to your pension.

You want more control as well as tax rebates over your retirement savings that benefit you and your business both.

That’s where a small self-administered scheme (SSAS) pension can help you control your financial aptitude post-retirement.

But how does one set up a SSAS pension in the UK? And is it even the right choice for you?

In this guide, we’ll walk you through the basics of a SSAS and also explain how to set it up step-by-step so you can understand and use its full potential to control your retirement planning. 

What is a SSAS pension scheme and how does it work?

A small self-administered scheme (SSAS) is a workplace pension designed for small businesses, typically those with up to 11 members (usually directors or senior employees).

Instead of regular pensions, a SSAS allows you to put your money into assets that will help you in your business, e.g. buying commercial property or giving loans to your company.

It is a trust-based scheme, which means that every member acts as a trustee in performing joint investment decisions.

How a SSAS pension differs from traditional pension options

SIPPs (Self-Invested Personal Pensions) offer flexibility for individuals. In a SIPP, the account holder is the sole owner and has the authority to change or divest.

A SSAS, by comparison, is collectively owned by its members and each member has an equal say in how the collective assets are managed.

This model is a perfect fit for organisations that want to pool their resources for their common strategic investment.

For example, you could use your SSAS to purchase a building for your office and rent it back to your company.

This way, you can grow both your business and pension at the same time.

Key benefits & significance of a SSAS pension scheme

• Your company's contributions are tax-deductible but no capital gains tax or income tax are imposed on investments. Also, as per the October 2024 budget, SSAS are protected from inheritance tax (IHT) until at least April 2027.
• You have more authority to decide where you invest your pension funds. Hence, no reliance on generic, third-party fund managers.
• You can channel your finances to grow your business directly while also growing your pension funds.

Significance of SSAS

Well, a SSAS gives your business a huge financial advantage. For example, you can use your retirement savings to buy a commercial property your business needs.

In that case, the rent your company pays goes back to the SSAS which not only grows your pension but also reduces the taxable profits of your business.

How to set up a SSAS pension scheme in the UK?

With a SSAS pension, you can build a financial structure that reflects your business and retirement objectives conveniently.

Let’s break down the process of how to set up a SSAS pension scheme step-by-step, explaining why each step matters and how to get it right.

Assess the eligibility & finalise the members

Determine who’ll be a part of your SSAS. A SSAS can be set up for UK-registered limited companies with up to 11 members, who are usually the directors or the senior employees.

A small team, or even just a single director, can set a SSAS up.

Key requirements:

• The business must be registered in the UK (sole traders aren’t eligible).
• All members of the SSAS have to be trustees of the scheme. This means that they have a legal responsibility to manage the pension.

Decide a name & establish a trust for the SSAS

The second step in learning how to set up a SSAS pension scheme is to name your pension scheme and create a trust deed. A ‘Trust Deed’ is the legal framework of your SSAS. It is a document that:

• Shows the rules of the scheme (for instance, how you make business decisions).
• Clarifies member rights (e.g., how the company hands out benefits).
• Describes the responsibilities of the trustee (e.g. compliance with HMRC rules etc)

You should get the services of your lawyer or an expert in the area of SSAS to compile this document. Don’t cut corners here as that can lead to disputes or HMRC penalties.

Once you have your trust deed ready, hire a pension administrator who’ll take care of the daily tasks, such as submitting tax returns and making sure that the company adheres to the law.

Although you can manage the SSAS by yourself as well, many companies prefer to hire a professional in order to avoid any costly mistakes.

Comply with anti-money laundering laws & register with HMRC

Each member of your SSAS has to verify their identification as a part of anti-money laundering legislation.

Once done, register the trust with HRMC. Without HMRC approval, your SSAS won’t qualify for any tax relief on contributions or growth.

To register the trust, you must:

Fill out the form APSS200 and submit it to HMRC.

Provide details about the trustees, scheme structure and the intended investments.

The whole registration procedure normally takes 4–6 weeks. However, if your investments get flagged (e.g. high-risk assets), then HMRC may ask for additional details. Also make sure with your SSAS provider that all documents are accurate.

This is a crucial step in learning how to set up a SSAS pension as a single mistake might delay the approval or trigger an HMRC inspection.

Transfer existing pension funds

You can also consolidate old pensions from previous employers or SIPPs into your SSAS.

This will enable you to leverage bigger investment opportunities such as purchasing properties. Here’s how to do it:

• Contact your current pension providers and ask for the transfer value.
• Check if there are any exit fees or penalties involved. Some providers charge around 5% for early transfers.
• Make sure that the SSAS provider you have chosen is accepting transfers (most of them do).

Set up a dedicated bank account

The last step in learning how to set up a SSAS pension fund is to set up a dedicated bank account.

The SSAS must operate independently from your business finances. This account will manage:

• Contributions from the company or members.
• Investment transactions (e.g., buying shares or property).
• Receiving rental income or dividends.

 

The bank you open an account with should be well acquainted with the SSAS rules and regulations.

Banks like HSBC, Barclays offer business accounts specifically dealing with pension schemes.

Register with The Pension Regulator

Once HMRC allots you your official pension scheme tax reference (PSTR) number, register your SSAS with The Pensions Regulator. It’s the authority in the UK that oversees matters related to the work-based pensions.

This regulatory body will make sure that everything is in compliance with regulations for your pension.

Conclusion: How to set up a SSAS pension

Learning how to set up a SSAS pension not only gives you more control over your savings but can also motivate you to grow your business faster with tax efficiencies and financial flexibility.

However, a SSAS is not the best pension model for everyone. It needs time, knowledge and a specific investment strategy.

But if you want to combine your business growth with retirement planning, it is a powerful tool.

Get expert advice

At Regulated Advice, we make it easy to set up your preferred pension plans by helping you connect with top advisors, regulated by the Financial Conduct Authority, who will guide you on how to set up a SSAS pension fund properly.

Let Regulated Advice match you with a financial advisor for expert advice.