SIPP vs. SSAS
Small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) are both investment-regulated pension schemes – in other words, you are able to influence how your own pension pot is invested. But what’s the difference between a SIPP and an SSAS, are the rules surrounding both the same, and which one is right for you?
We answer all those questions and more in our guide. Select a topic below for more information, or read on for a thorough understanding.
SSAS vs SIPP
There’s no easy answer to which is ‘better’: both the SIPP & SSAS have their benefits – it is all dependent on your own individual circumstances.
When you are looking at the SIPP and SSAS you must first understand what both are…
What is a SIPP?
A Self Invested Personal Pension (SIPP) is known now as a DIY (do it yourself) pension. By having a SIPP you are able to invest almost anything you want, making your very own pension choices and managing it yourself over time. If you do not have the time, you are able to appoint an investment manager as a trustee to run your portfolio as you wish. SIPPs are geared more towards people who understand investments and investing. Having a SIPP is more flexible than having a more traditional pension but there is also more risk and responsibility on you having to make investment choices yourself.
What is a SSAS?
A Small Self Administered Pension Scheme (SSAS) is in the main a workplace/company pension scheme. Generally a SSAS is set up by the company directors for themselves and other key or senior members of staff, but can also be open to other employees.
Normally there is no more than 11 or 12 members in a SSAS. Contributions to a SSAS can be made by the individual and/or the company with both benefiting from tax relief.
What are the key differences between the two?
There are a few differences between an SSAS and a SIPP:
- A SIPP offers an individual complete control over their investment portfolio where as a SSAS is controlled by the trustees of the scheme (usually the directors of the company).
- A SSAS can be allowed to purchase commercial property as part of the investment portfolio which could mean a company could purchase premises through the SSAS and pay rent back to the pension fund.
- Upfront costs of a SSAS compared to a SIPP are usually more but as an SSAS is for groups of people the more people means less cost – generally once four or more are in an SSAS it becomes cheaper than a SIPP.
- With a SIPP you know that the whole pot is yours. There are no individual pots in a SSAS so each share is defined by a percentage.
- The company can take a loan from a SSAS of up to 50% of the schemes net asset value – there are no loans allowed from SIPPs to connected parties of the scheme.
Which should I get?
Usually a SSAS is now the pension of choice for director controlled companies due to its flexibility and tax breaks. Most SIPPs are geared to a private individual who has an interest/knowledge of investments and who has the time to manage it themselves.
To get the best advice for you and your pension needs speak to a pension expert, like the ones we work with. If you make an enquiry we can put you in touch with one today.
How do I carry out a comparison?
Knowing what you should be comparing is crucial. Below are a few things to consider whilst comparing the SIPP and SSAS.
SSAS vs. SIPP products
There are many SASS and SIPP schemes and associated products on the market, like the Investec SIPP and SSAS saver. As both the SIPP and the SSAS can both have elements of cash, shares and investments you will more than likely have numerous accounts running under the same wrapper. Investec bank have a SIPP and SASS saver account that can be part of either a SIPP or SASS and cater for your cash needs. However, there is a minimum balance of £25,000 to earn interest and a 30 day notice period to withdraw funds.
SSAS vs. SIPP property purchase
Investments in commercial property is very common in both the SSAS and the SIPP. The SSAS however has the benefit to directors of allowing them to purchase their own commercial premises via a lease and pay a rental income back to the SSAS. Investments in residential property is much less common due to the additional tax charges applicable.
SSAS vs. SIPP costs
Costs for both are similar and could be anything from around £125 per year upwards depending on many variables such as:
- How much is the pension pot/how much is the investment?
- What type of investments you will want?
- How often you will want to change/trade?
- What service level, ongoing advice or support you want?
A SASS could potentially be a more cost-effective pension scheme per person if the number of individuals enrolled in it is above four.
It may be best to speak with a pension expert to get more information or to get a personalised quote. You can get in touch with us today by making an enquiry here and touch base with one of the experts we work with to get the best advice for your pension needs.
Can I do a SSAS to SIPP or SIPP to SSAS transfer?
You are able to transfer into or out of any UK pension scheme like a SIPP or SSAS as long as it is a registered pension scheme (registered with HM Revenue & Customs).
SSAS to SIPP
One of the major benefits of being in an SSAS is that it should be a cost effective way of your pension being managed due to the multiple participants in the same scheme.
As long as you are aware of the potential of increased costs and having to manage it yourself, this should not be an issue.
SIPP to SSAS
There have been many problems in this space in the past with the pension regulator calling for transfer bans from SIPPs and other pensions into a SSAS. Obviously there are the potential benefits here of saving money on the costs in comparison to a SIPP but this comes with risks attached.
Speak to a pensions expert
If you have questions about SIPP vs SSAS or pensions in general and want to speak to an expert for the right advice, call us today on 0808 189 0463 or make an enquiry here.