One of the main reasons company directors choose a SSAS over a standard pension is the investment flexibility. A SSAS has significantly wider investment powers than most pension arrangements. This post sets out what those powers are, how the most commonly used investments work, and where the HMRC limits apply.
A broader investment mandate
A standard workplace pension typically invests in a managed fund chosen by the provider. A SSAS can do that too, but it can also hold assets that are simply unavailable in most other pension wrappers — most notably commercial property and loans back to the sponsoring company.
That wider mandate is one of the features that makes a SSAS a planning tool, not just a savings vehicle.
Commercial property
A SSAS can purchase commercial property directly. This includes the building from which the sponsoring company trades.
The practical result is that the company can sell its trading premises to the SSAS (or the SSAS can purchase new premises) and then rent them back from the pension. The rent goes into the pension tax-free. The company gets a deductible rent expense. Both parties transact at an arm's length market rate.
This is one of the more powerful features of a SSAS for directors who own or plan to own their commercial premises.
Note: a SSAS cannot hold residential property directly. If you are interested in using a pension structure for residential property investment, that works differently — see our page on tax-efficient property investment for directors.
Loans back to the sponsoring company (loanback)
A SSAS can lend money to the sponsoring employer — the company that has established the scheme. This is known as a loanback.
HMRC permits loanbacks, but they must meet strict conditions:
- The loan must be on arm's length commercial terms
- It must carry a commercial rate of interest
- It must be secured against assets of the company
- It cannot exceed 50% of the net scheme assets at the time of the loan
- Repayment must be by equal instalments, and the term must not exceed five years
When structured correctly, a loanback gives a growing company access to capital it has already saved — via the pension — while the pension earns interest at a commercial rate. It is a useful tool for businesses that need working capital or want to fund a specific investment.
TLPI manage the compliance on loanbacks as part of our ongoing administration service, so the SSAS remains clean with HMRC.
Listed securities
A SSAS can hold shares, bonds, gilts and regulated collective investment funds — the same asset classes available in a SIPP or a standard pension. For directors who want a portion of the pension invested in traditional markets alongside property or a loanback, this option is straightforward.
What a SSAS cannot invest in
HMRC prohibits certain investments inside a SSAS. The main categories are:
- Residential property — held directly. There are tax charges if a SSAS acquires a residential property outright.
- Tangible moveable property — artwork, jewellery, classic cars, wine and similar assets are not permitted.
- Employer-related investments above the HMRC limit — a SSAS can invest in the sponsoring employer's shares or property, but this is capped at 5% of the scheme's net assets (the loanback limit is separate and higher, as set out above).
If the scheme holds a prohibited investment, HMRC can impose tax charges. This is one of the reasons that professional, ongoing administration matters — the administrator's job is to prevent the scheme from straying outside the permitted boundaries.
Managing compliance
TLPI act as SSAS administrator for the schemes we run. That means we monitor the investment mix, manage HMRC reporting, and flag anything that could create a compliance issue before it becomes one.
Directors can focus on running their business; the pension compliance sits with us.
Find out more
For the full breakdown of SSAS investment options and how they are structured, see our page on what a SSAS can invest in. For details on the TLPI approach to SSAS, including how we set up and administer schemes, visit the property SSAS page.
