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   SSAS investments
  SSAS Investments
  Permitted investments   
  Prohibited investments   
    
    

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Permitted investments
The principle of all occupational pension schemes including a Small Self Administered Scheme (SSAS) is that they provide relevant benefits for the members at retirement or on death. This means the IR SPSS must ensure that a SSAS does not give non-relevant benefits to members or to those persons connected to them.

Regulation S11614 requires the IR SPSS to approve investments that provide relevant benefits at retirement or death. These investments cannot provide direct or indirect benefit to the members, such as the SSAS purchasing a residential property to be used by a member and that member's family. Permitted SSAS investments are as follows:

Property
  A Small Self Administered Scheme pension fund can be used to purchase the commercial property occupied by the company as the company is considered as a separate legal entity. It is not possible to purchase property from a SSAS member as this is a connected person. This route of the SSAS purchasing a property has to be compared with the company or the directors buying the property.

By using a SSAS pension fund to buy the property there would have been corporation tax relief on contributions to the SSAS. This means it costs less for the SSAS to buy the property than the company as the later would make the purchase net of corporation tax.

In a SSAS there is no liability to capital gains tax on any subsequent sale of the property and all rental income paid by the company to the trustees would not be liable to income tax. Furthermore the rent paid by the company is an allowable expense against corporation tax.

There are risks if the property represents most of the assets in the SSAS pension fund, leading to a lack of diversification and the risk that it could be difficult to sell the property to realise the proceeds at retirement. If the SSAS purchases the property the company cannot use the property as security, or receive any capital allowances on industrial buildings.

The SSAS must always charge the company a fair market rent and if the SSAS borrowed money to purchase the property it cannot receive income tax relief on the cost of servicing these borrowing.
   
Loans
  The trustees of the Small Self Administered Scheme are allowed to make loans from the pension fund to the company or any associated company for the company's business. This must be for a specified fixed term and at a commercial rate of interest with the terms clearly indicated in a loan agreement including confirmation of this loan from the pensioneer trustee.

The maximum size of the loan as a percentage of the SSAS pension fund is 25% within the first 2 years of the existence but this cannot include any pension transfers from another scheme. After 2 years the loan can be 50% of the SSAS pension fund, however, these percentages exclude any assets that are earmarked for a member that has retired or died.

The IR SPSS state that the purpose of the loan must be for company business purposes only such as purchasing commercial property or plant and machinery. The term can be any as agreed by the parties that is consistent with the purpose it is to be used for and the interest rate charged must be bank base rate plus 3%.
   
Borrowing
  The trustees of the Small Self Administered Scheme can borrow money to buy an asset if the pension fund does not have the resources. The reason for the borrowing must be commercial, such as purchasing commercial property.

The IR SPSS set maximum borrowing limits as 45% of the market value of the SSAS pension fund plus 3 times the employer's annual contribution plus 3 times the members' annual contributions but excluding the value of any assets that are earmarked for a member that has retired or died.

Borrowings must be notified to the IR SPSS except where the term is less than 6 months and the amount borrowed is less than the lower of £50,000 or 10% or the current market value of the SSAS pension fund.
   
Unlisted shares
  The trustees of a Small Self Administered Scheme pension fund can purchase up to 30% of the shares in an unlisted company. They are not permitted to purchase shares from the members or persons associated with them and therefore the trustees cannot purchase the company sponsoring the SSAS. There are also limits on the voting rights of the shares and the dividends received, this being limited to 30%.

The PSO have indicated the following as acceptable investments for a SSAS:
         
  Company shares Financial futures
  Deposit accounts Commodity futures
  Copyrights Traded options


Prohibited investments
There are a number of investment activities and investment assets that are prohibited. The Small Self Administered Scheme trustees cannot make a loan:

To SSAS members or people connected with the member;
   
To the sponsoring company or associated company at an non-commercial rate;
   
To the sponsoring company or associated company unless the loan is used for an approved commercial purpose;
   
To companies that are insolvent;
   
To keep a failing company from insolvency;

The IR SPSS prohibits the use of investments as follows:

Residential property, unless it is linked to a commercial property and not occupied by a member or a person connected to a member;
   
Third party loan, which directly or indirectly results in the member receiving a similar loan from a third party;
   
Non-relevant benefits, conferred on a member as a result of an investment by the SSAS;
   
Purpose of the scheme, where the IR SPSS believe the investment does not match the scheme purpose for the members;

The IR SPSS prohibits the following direct investments:

  antiques works of art furniture  
  rare stamps yachts jewellery  
  rare books gold bullion vintage cars  
  gem stones krugerrands oriental rugs  
  fine wines          
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