SSAS and SIPP pension

How to choose the right one

General overview

If you’ve ever wondered what the difference is between a Small Self-Administered Scheme and Self-Invested Personal Pension, well, they two may not be so different from each other, although each one as its unique traits.

Through the perspective of the HMRC, they are both regulated the same way and both are investment-regulated pension schemes. What this means is that the basic rules around borrowing, lending and investment are pretty much the same for both SSAS and SIPP.

However, this may lead some folks into thinking that there are no distinctions between them, which is absolutely not true.

Key distinctions between SSAS and SIPP

In terms of governance and eligibility, let’s take a look at the key differences between the two:

SSAS

SSAS is a relatively small occupational pension scheme typically set up by the directors of a business looking to gain more control over investment decisions in regards to their pensions – but more importantly, to use those pension plans as a means to invest in their business. So, each member of the SSAS is a Trustee in most cases.

The features of a SSAS include:

• It’s an occupational pension scheme only.
• The members are typically employees or directors of a sponsoring employer.
• There’s no limit to the number of members it can have but the scheme tends to be quite small, as the name suggests.
• Every member owns a notional share of the SSAS funds. This includes non-insured assets like property and even insured money held within a trustee investment plan.

SIPP

In contrast, SIPP is a personal pension plan that’s set up either by an insurance company or specialist SIPP operator, granting each member greater control over their investments.

Anyone may take out a SIPP as long as they meet the provider’s eligibility criteria, which is usually based on a minimum fund size owing to the higher costs associated with running a SIPP (compared to a regular personal pension). Some of the other features of a SIPP include:

• It’s a personal pension plan only.
• It provides an option to invest in non-insured assets (unit trusts) as well as property and insured assets (trustee investment plan).
• A member’s employer can contribute to the pension plan, in addition to operating payroll deduction on that member’s behalf.

So, in summary, the main differences are:

SSAS

• Offers greater investment control and flexibility over the Members or Trustees
• Sponsoring company can be lent to
• Members are also Trustees
• Cost-efficient pension scheme particularly for company directors or family members who are employed in the business

SIPP

• Open to anyone
• Sponsoring company cannot be lent to as there isn’t one
• It’s a type of personal pension with higher running costs, especially if there are multiple members, as each member has their own dedicated SIPP; compared to SSAS, which may have up to a maximum of 12 members within the same fund
• SIPP provider mostly acts as the Trustee, as opposed to a Member

Choosing the right pension scheme depends on (to a great degree) who the members are and how much involvement they desire in running that scheme. Our Certified Public Accountants are only a phone call away if you wish to understand the difference between SSAS and SIPP in more detail, and especially which can benefit you more according to your unique business circumstances.

Our friendly financial adviser is only a phone call away: 01753 373505 or  Get in touch with us for free initial consultation now.

Another useful link from HMRC  Can be found here.