Both Self Invested Personal Pensions (SIPP) and Small Self Administered Schemes (SSAS) are governed by the same pension tax legislation and regulations as defined by HM Revenue & Customs. However there are key differences.
The main difference when considering the two is that a SSAS can have up to 11 members whilst a SIPP is for an individual.
SSASs have a sponsoring employer who makes pension contributions into the pension scheme on behalf of the members. The members are usually the directors of the company who want to have more control over the investment decisions within their pension and the funds can be used to invest in the business or make a loan to the business.
A SSAS is an occupational pension scheme, the members being trustees to the scheme along with a professional trustee, such as Harsant Pensioneer Trustees Ltd. Since 2006 HMRC do not require a SSAS to have a professional trustee but as Harsant Services Ltd. act as the Administrators to the scheme, we have found it is a more efficient and professional arrangement if a professional trustee is in place and this is a requirement of establishing a SSAS with Harsant Pensions.
A SIPP is a personal pension scheme, established by a SIPP Provider, such as Harsant Services Ltd. The Harsant SIPP member is trustee to their own SIPP and co-signatory to all documentation. A SIPP member will want more control over their pension investments and will usually be transferring and consolidating previously accumulated pension funds. Due to the additional cost of running a SIPP rather than an insured personal pension, this initial fund will be in excess of £30,000. The SIPP member's employer can contribute to the pension scheme. The SIPP member can also make personal contributions to their SIPP, Harsant Pensions reclaiming the basic rate tax relief from HMRC on relevant earnings.
A SIPP can accept the transfer of Protected Rights Pensions, a SSAS cannot.
We would always recommend financial advice is sought before investments are made, however, with a SIPP it is the individual who has control over where the pension funds are invested. SSAS investments are usually collective investments between the SSAS members. This can have advantages when making a large investment (see property below), however, consideration must be given when establishing a SSAS as to what will happen to the split of investments if a member leaves the sponsoring company.
SSASs can lend up to 50% of the value of the scheme to the sponsoring employer, SIPPs do not have a sponsoring employer and cannot lend money to a connected party (see Glossary for definition).
SSASs can invest up to 5% of the fund value in the shares of the sponsoring company. A SSAS can potentially own 100% of a company's shares as long as the value does not exceed 5% of the SSAS value.
SIPPs do not have a sponsoring employer and cannot lend to connected parties however, they can lend to unconnected parties.
When considering commercial property purchase as an investment, the pooled SSAS members fund can be used to purchase the property. An individual SIPP can purchase a commercial property, though the size of an individual's fund would restrict the purchase price. Several Harsant SIPP members can form a syndicate to purchase a property.
Harsant administration fees; the more members a SSAS has (up to 11 members) the more cost effective a SSAS would be to each member, over a SIPP.
SSASs are regulated by the Pensions Regulator (tPR) and are subject to the tPR fees. The Harsant SIPP is authorised and regulated by the Financial Services Authority (FSA) and their fees are paid by Harsant Pensions and not the individual SIPPs.
Property purchase and legal fees are more expensive between a SIPP syndicate than through a SSAS.
We would always recommend you seek financial advice before making the decision between a SSAS or a SIPP. We would be happy to help with that process, finding solutions to what you are trying to achieve is our speciality.