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Small Self-Administered Schemes (“SSASs”) and Self-Invested Personal Pensions (“SIPPs”) are specialised types of pension scheme. 

A SSAS is an occupational pension scheme for fewer than 12 members, usually the directors or senior employees of the company establishing the scheme;

By contrast, and as the name suggests, a SIPP is a type of personal pension. 

Together they are often referred to as “member-directed pension schemes” as they permit their members to determine investment strategy, subject to overriding legislation.

How can Vialex help?

Vialex advises on all aspects concerning SSASs and SIPPs. 

  • We advise a number of scheme providers in relation to their standard documentation.
  • Our pensions practice also advises members, scheme administrators, and trustees on
    • interpreting the legislation and case law;
    • issues arising from the divorce or bankruptcy of scheme members and the impact this has on their pension entitlements;
    • the resolution of disputes or complaints involving the Pensions Ombudsman or Financial Ombudsman Service.
  • Together with our commercial property and corporate colleagues we regularly advise schemes on their proposed investments, including:
    • commercial property and any associated lending work;
    • the acquisition of shares in unquoted companies;
    • the making of loans by schemes.

Commercial property

Both SSASs and SIPPs may invest in commercial property – indeed this is probably the most common reason for choosing these schemes. 

  • This may be an entirely arm’s length investment, but very often involves the scheme acquiring the premises from which the members’ existing business operates or even acquiring new premises as part of an expansion programme. 
  • If the trustees of the scheme lease the property back to the members’ business this must be done on standard commercial terms and at an open market value rent. 
  • Both types of schemes may also borrow money from financial institutions up to 50% of the scheme’s net assets, which may help fund the purchase of commercial property.
  • If purchasing commercial property which the members’ business currently owns, the purchase price paid would be an injection of capital into the business which it may then use at its discretion.  As SSASs and SIPPs are tax-exempt vehicles any increase in the value of the commercial property would be free of capital gains tax. 
    In the meantime, the rent paid by the business would be a deductible expense while providing a tax-free income stream for further investment by the scheme.

Unquoted shares and loans

SSASs and SIPPs may also acquire unquoted shares which allows them to acquire a shareholding in the members’ business. 

  • For SSASs there are specific limits with the maximum being 5% of the net assets of the scheme in shares in any one employer and an overall maximum of 20% in all connected companies. 
  • Although there is no equivalent limit for a SIPP, there can be problems if the company it invests in holds residential or other “taxable property” or if the scheme is deemed to be trading. 
    Again, any increase in the value of the shares would not incur a capital gains tax charge and any dividends paid would provide a further source on income for investment.
  • Lastly, SSASs may even lend monies to the members’ business, provided this is on commercial terms and for a commercial purpose. This means that a business which found itself unable to obtain funding, e.g. to purchase new plant or machinery or renovate its premises, may still be able to borrow the monies for this from the SSAS
    The loan repayments would be a deductible expense for the business and would of course provide the SSAS with additional income.  Although SIPPs may also make loans these are only permitted where the borrower is an unconnected third party and would have to be on standard commercial terms.

For further information please contact Steven Dunn or Scott Moncur (details below).

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