Member Benefits

Income and
tax-free cash

Member benefits will normally be taken as ‘flexi-access drawdown’, although other options permitted by HMRC, e.g. ‘capped drawdown’ or a ‘lifetime annuity’, are also available if required.

If you wish to take benefits then you must first ‘crystallise’ some, or all, of your SSAS fund.

You can then normally take a tax-free lump sum of up to 25% of the amount crystallised, subject to a maximum of 25% of the Lifetime Allowance .  It may be possible to take a larger tax-free lump sum if you have pension protection.

You can withdraw the remainder of the amount crystallised as one-off or regular income payments of any amount whenever you wish, subject to income tax under PAYE.

If you have taken any tax-free lump sum or income under flexi-access drawdown then you will be subject to a reduced Annual Allowance – the ‘Money Purchase Annual Allowance’ – and the carry forward facility will not be available.

Warning: Taking an income from a SSAS may reduce the value of your SSAS fund, especially if investment returns are poor and a high level of income is taken.  This may result in lower maximum income in the future than would otherwise be the case. We strongly recommend that you seek professional advice from an adviser regulated by the Financial Conduct Authority if you are considering taking tax-free cash and/or income from a SSAS.

Lifetime

Allowance

If the amount of the your SSAS fund that is used to provide benefits, i.e. the amount ‘crystallised’, exceeds the Lifetime Allowance (£1,073,100 for the 2020/21 tax year) then you will have to pay tax, as explained below, on the excess. Please note that you may be able to use a higher Lifetime Allowance if you have pension protection.

If you take the excess as a lump sum then it will be subject to a one-off 55% tax charge. If you do not take the excess as a lump sum then it will be subject to a one-off 25% tax charge that will be paid from your SSAS fund.

A second test will be made against the Lifetime Allowance when you reach the age of 75.  If the value of your SSAS fund at that time exceeds the amount that was crystallised (less any tax-free cash taken) by more than your available Lifetime Allowance then the excess will be subject to a one-off 25% tax charge that will be paid from your SSAS fund.

If you have not taken any benefits by the age of 75, then the whole of your SSAS fund at that time will be tested against the Lifetime Allowance and any excess will be subject to a one-off 25% tax charge.

Note: These Lifetime Allowance tests do not apply if you have enhanced protection or to any of your SSAS fund that relates to income payments that commenced before 6 April 2006.

Death

Benefits

In the event of your death, then your SSAS fund can be used to provide benefits for your dependants or for individuals who you have nominated. There is normally no inheritance tax payable in respect of these benefits but income tax may apply, as explained below.

You can nominate the individuals, trusts and/or charities who you would like to receive any death benefit and the SSAS trustees will consider your wishes when deciding who will receive the benefit.  However, in order to avoid inheritance tax, your nomination will not be legally binding on the SSAS trustees.

Death benefits can be paid as a lump sum and/or income with taxation dependent on whether you die before or after your 75th birthday.

If the death benefit is paid as a lump sum and you die before your 75th birthday then it will normally be tax-free (although it may need to be tested against the Lifetime Allowance and a Lifetime Allowance Charge may be payable). However, if the death benefit is paid as a lump sum and you die on or after your 75th birthday then it will not need to be tested against the Lifetime Allowance and it will normally be subject to tax at your beneficiary’s rate of income tax.

Alternatively, your beneficiaries can choose for the death benefit to be paid as income, in which case the money can remain invested in the SSAS (or transferred to another pension arrangement) and continue to grow in a tax-free environment. Your beneficiaries can withdraw one-off or regular income payments of any amount, whenever they wish.

If you die before your 75th birthday then any income payments will normally be tax-free (although the death benefit may need to be tested against the Lifetime Allowance and a Lifetime Allowance Charge may be payable). However, if you die on or after your 75th birthday then the death benefit will not need to be tested against the Lifetime Allowance and any income payments will normally be subject to tax at your beneficiary’s rate of income tax.