SSAS vs SIPP: A Comparison Guide
People work hard to turn dreams into reality, but most busy-bodies will reach a point when all the hustle and bustle slows down. The thought of retirement may seem distant, but preparing for the time when your income significantly reduces literally pays off when you’re ready to retire. With that in mind, there are two popular pension plans in the UK: Self-Invested Personal Pension (SIPP) and Small Self-Administered Scheme (SSAS).
What is an SSAS Pension?
Created for company directors, an SSAS is an occupational pension scheme that allows up to eleven members to benefit from the contributions and tax relief. Members can include directors, senior staff, and even employees! Some key features that distinguish SSAS as a trust-based pension include the following:
- It is an occupational pension scheme, which means that employers provide it;
- It caters to up to 11 members;
- It is regulated by the Pensions Regulator and HMRC;
- Every member, be it directors or their respective employees, will have a notional share of the funds, though they are limited to investing up to 5 per cent of the scheme assets only;
When It Makes Sense to Go for SSAS
- When your individual or combined pension fund reaches beyond £75,000;
- When you plan on pooling your pension fund with your family, business partners, and more;
- When you want the financial flexibility to lend your pension to your company;
What is a SIPP?
Dedicated to working individuals, anyone can get a SIPP and set up by an insurance company. Seeing as it takes a more “do-it-yourself” approach, SIPP members can have greater control over their pension pot whether or not they are trustees.
When It Makes Sense to Go for SIPP
- When your pension fund exceeds £75,000;
- When you plan to tailor your pension according to individual needs, which requires the aid of bespoke financial advisors;
- When you have the means or interest to pay higher fees compared to other pensions;
- When you want complete control of your investments;
SIPP vs SSAS: Choosing the More Suitable Solution For You
Both SIPP and SSAS are self-invested pensions that allow individuals to determine what goes in and out of their pension pot, but the nuanced differences can influence which is the better solution for you.
The simple guide above places SSAS in a field that is best suited for people who want to handle director-level investments with tax breaks and better flexibility — be it for business growth or pooling with other investors for a common interest.
On the other hand, SIPP is dedicated to individuals who want a better hold over their pension and have enough time or knowledge to manage their own investments. Either way, both pension schemes can be tricky in their own right, so it’s best to consult with a pension expert so you can be more equipped to meet your unique needs.
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