Investments

The investment flexibility of a SSAS allows members to invest their pension fund in a very wide range of investments. Vintage SSAS Services does not provide investment advice and will not dictate the investments that can, and cannot, be made in a SSAS. We will advise on the tax implications of potential SSAS investments but it is ultimately a matter for the SSAS trustees to decide which investments to make.

There are no explicit HMRC restrictions on the investments that a SSAS can make. However, some investments may give rise to tax charges and may, therefore, not be appropriate for a SSAS.

Loans to sponsoring employers

A SSAS is permitted to make a loan to a sponsoring employer but the loan must meet all the following conditions, otherwise it could be treated as an unauthorised payment and subject to serious tax consequences.

Security: The amount of the loan must be secured throughout the full term as a first charge on any asset whose value is at least equal to the face value of the loan (including accrued interest). The charge must be in place before the loan is made and there must be no other charge on the asset that takes priority over the charge.

Interest rate: The interest rate on the loan must be at least 1% above the base rate.

Term of loan: The term of the loan must be no longer than five years and the total amount owing (including interest) must be repaid by the end of that term.

Maximum amount of loan: The maximum amount that can be lent to a sponsoring employer is 50% of the net assets of the SSAS.

Repayment terms: The loan must be repaid in equal instalments of capital and interest for each complete year of the loan.

Loans to third parties

A SSAS may also make a loan to a third party, i.e. to an individual or company who is not connected to a member or sponsoring employer of the SSAS. There are no specific requirements that apply to such loans but they must be genuine investments and should be prudent, secure and taken out on a commercial basis.

If a loan to a third party is used, either directly or indirectly, to acquire any ‘taxable property’, i.e. residential property or tangible movable property, then there may be serious tax consequences even though the loan is to a third party.

Properties

A SSAS can invest in a commercial property that is let to the sponsoring employer.  In such cases it is important that the property is managed on an arm’s length basis and that rent is charged based on the open market rental value.

It is possible for a SSAS to borrow money, subject to conditions, to help fund  a property purchase.

Inappropriate SSAS investments

The following investments are not normally considered appropriate for a SSAS:

Carbon credits

Intellectual property and copyrights

Litigation funding

Seed capital

Contracts for difference or spread betting

Land banking

Loans for acquiring residential or other ‘taxable property

Traded endowment policies

Currency trading accounts

Life settlement funds

Peer-to-peer lending



Unquoted overseas companies

    1. Direct investment in ‘taxable property’, which is defined as:

      • Residential property, including residential ground rents; or

      • Tangible moveable property (e.g. antiques, boats, cars, jewellery, wine, works of art).

    2. Loans to members and/or individuals or companies connected with a member or sponsoring employer (excluding loans to a sponsoring employer that meet the conditions set out above)

    3. Any investment that is made to facilitate early access to a member’s pension fund (‘pensions liberation’) or any direct or indirect payments or benefits to the member and/or persons connected with a member or sponsoring employer of the SSAS.

    1. Unlisted UK companies

    2. Unregulated collective investment schemes (UCIS)

    3. Loans to third parties

    4. Indirect investment in ‘taxable property’

Transactions with a member or a connected person

A SSAS is permitted to enter into investment transactions with a member or an individual or company connected with a member or sponsoring employer of the SSAS.  However, any such transactions must take place on commercial terms and an arm’s length basis.

Borrowing

A SSAS can borrow for investment purposes and charge its assets as security for any such borrowing. The maximum amount it can borrow is 50% of the fund’s net assets (after deducting any existing borrowings).

What is the tax position on a SSAS’s investments?

The investments in a SSAS will normally be free from UK income and capital gains taxes, although tax cannot be reclaimed on UK dividends.

Other considerations

It is important to consider the following factors regarding the suitability of a proposed investment in a SSAS:

  1. Is the proposed investment actually available to a SSAS?

  2. Are you aware of the risk factors associated with the investment?

  3. Are there any restrictions on selling the investment, e.g. a minimum investment term, which could affect the ability to encash the investment in order to:

    • switch investments

    • take income and/or lump sum benefits

    • allow benefits to be paid to your beneficiaries in the event of your death?

  4. Are there any circumstances in which the SSAS could be asked to inject more funds into the investment, e.g. as a further call, in which case are you satisfied that those funds will be available when required and are you aware of the consequences if those funds are not available?

  5. Is the investment likely to give rise to any taxation?

Warning: We recommend that if you are unsure about any of these points, or whether a particular investment is suitable for a SSAS, you seek professional advice from an adviser regulated by the Financial Conduct Authority.