For most people the answer to this question would be, yes. However for company directors and their families the answer could well be different. In short, if you have the wrong arrangement it could be an expensive mistake.

A SSAS, or Small Self Administered Scheme to give it its full name, is a pension arrangement first introduced by the Inland Revenue in 1973. It is an occupational pension scheme and without doubt the most flexible type of pension arrangement there is.

A SIPP, or Self Invested Personal Pension, was introduced by the Inland Revenue in 1991 in answer to all those who were either self employed or partners in a business and could not be members of a SSAS.

The cost of setting up either type of arrangement and ongoing charges are about the same but for those who can have a SSAS the advantages are much, much greater.

Small Self Administered Schemes are not heavily promoted these days. Indeed it is only the niche pension administrators who offer them contrary to a few years ago when most insurance providers offered them. The reason for the change? Several years ago the Inland Revenue had a change of policy. They decided that should the annual returns for a SSAS be wrong and further tax due it would be the responsibility of the scheme administrators, to make good the shortfall not the owners of the SSAS. Most pension providers (insurance companies) ran for the door!

So what is the difference between these two pensions if the costs for setting them up are similar? A SASS being an occupational pension scheme offers the following. If, within the first two years of joining such a scheme, the member decides it’s not for them, they can leave the scheme and ask for a refund of the contributions (if any) they personally have made (less a small deduction for tax relief given by HMRC). Members of a SIPP cannot do so.

Secondly, in the event of the employing company becoming insolvent or the member becoming bankrupt the assets of the scheme are beyond the reach of the creditors and the scheme remains intact for the benefit of the member in retirement. Now it is true to help even up the balance most SIPPs have an anti-bankruptcy clause in their small print but sadly these have not been fully tested in the courts and, ask your SIPP provider if they will offer a guarantee of this clause working and the chances are they will say no.

The biggest differences between the two arrangements are that a SSAS can, within HMRC guidelines, loan money back to the employer! A SIPP cannot do so.

Thus for the Director who has to negotiate and renew overdraft facilities each year with his bank, or is wanting to fund a large capital project access to pension fund monies could be an advantage. 

Conclusion

For most, if not all Company Directors, the benefits of a SSAS (Small Self-Administered Schemes) far outweigh the potential limitations and drawbacks that a SIPP (Self-Invested Personal Pensions) has. The cost of setting up and running both types of pension arrangement is largely the same.

How can FRM help you?

Do you already have a SIPP and reading this has made you sweat? Well, all is not lost! Financial Risk Management have considerable experience in advising company directors on the best pension arrangements for them and their families. Switching from a SIPP to a SSAS could be an option, and we could assist you every step of the way. Call 01902 766648 to book a consultation call today.

No Pension. No Idea?

Maybe you are a company director relying on the automatic enrolment scheme being enough for your retirement. Perhaps you have never considered the fact your business could potentially contribute up to £40,000 each year into your pension fund before you start paying Corporation Tax. Or simply, you don’t know what would be the best pension plan for you. Whatever your situation, Financial Risk Management have no doubt seen it before and can help you. Why not call 01902 766648 to start your pension conversation with a registered IFA.