SSAS or SIPP?

Which wins in the battle of the pensions?

The differences between a Small Self-Administered Scheme (SSAS) and a Self-Invested Personal Pension (SIPP) are less than you might think. Both have their benefits and therefore the choice of which to choose comes down to your own personal circumstances.

What are the key differences?

SSAS

  • A SSAS is an occupational pension scheme.
  • With a SSAS, the Members are usually employees or directors of the sponsoring employer. Can only have up to 11 members.
  • Both the SIPP and SSAS can be allowed to purchase commercial property, but the SSAS can purchase its own premises and lease it back to the company, who pay rent into the pension fund.
  • A SSAS can lend up to 50% of the total fund back to the sponsored employer.
  • Upfront costs of a SSAS compared with a SIPP are usually more, but as a SSAS is for groups of people, the more people there are in the group means less cost - generally once three or more are in a SSAS it becomes cheaper than a SIPP.
  • A SSAS can invest up to 5% of the fund value in the shares of the sponsoring employer.
  • A SSAS can buy shares in more than one sponsoring employer so long as the total market value at the time the shares are bought is less than 20% of the total value of the Scheme.

SIPP

  • A SIPP is a personal pension set up by an insurance company or specialist SIPP operator.
  • With a SIPP the Member’s employer may contribute and operate a payroll deduction on the Member’s behalf.
  • A SIPP cannot loan to any members, or any person/company connected to the Member.
  • With a SIPP you know the whole pension pot is yours. There are no individual pots in a SSAS, so each share is defined by a percentage.
  • A SIPP doesn’t have a sponsoring employer so theoretically can invest up to 100% of the fund in the shares of any company. However, if it’s company-owned or controlled by the Member, that’s regarded as investing in taxable property.
  • Using individual SIPPs for syndicated property can be more expensive.
  • To change provider, the existing SIPP must be closed and existing assets transferred (which may require liquidation).

Which is the one for me?

This is a very personal question, but hopefully the check list above will help you decide whether a SSAS or a SIPP would be more suitable.