SSAS vs employee pension: Corporation Tax savings compared

What is a SSAS?

A SSAS is a pension scheme set up by an employer, typically for company directors and senior staff, with a maximum of 11 members. It is registered with HMRC and gives members far greater control over how the fund is invested than a standard workplace pension, including the option to hold commercial property and to lend money back to the sponsoring employer.

What is a standard employee pension?

A standard employee pension, such as a workplace defined contribution scheme, is typically run by a third-party provider on behalf of a wider workforce. Investment choices are usually limited to a set range of funds, and the scheme is not designed to interact directly with the sponsoring company's own assets or cash flow.

Corporation Tax deductions for employer contributions

Employer contributions to either a SSAS or a standard employee pension are generally deductible against Corporation Tax, provided they meet HMRC's wholly and exclusively test. In that sense, the tax relief mechanism is broadly the same for both. The difference lies in flexibility: a SSAS gives directors more scope to size and time contributions around company profits, since the scheme is set up specifically for a small number of members rather than administered at scale for an entire workforce. This can make it easier to align pension funding with a strong trading year, subject to individual circumstances and specialist advice.

Loanback

A distinctive feature of a SSAS is the ability to loan funds back to the sponsoring employer, up to 50 per cent of the scheme's net asset value, secured by a first charge on a business asset and made on commercial terms. This gives a company an additional way to access its own pension funding for working capital or investment, an option that is not available through a standard employee pension. Structuring a loanback correctly is a specialist task, and it is worth working with a pension specialist like TLPI to set one up properly.

HMRC treatment

Both SSAS and standard employee pensions must be operated within HMRC's rules to retain their tax advantages. A SSAS cannot hold residential property, and any loanback must be adequately secured and priced on commercial terms. Pension contributions into either type of scheme are also measured against the member's Annual Allowance, currently £60,000 for most people, and contributions above this can trigger a personal tax charge. Getting the detail right, particularly around a SSAS's investment and loanback rules, is best handled by a specialist rather than attempted independently.

Worked example

Consider a company with taxable profits of £300,000, comfortably above the £250,000 threshold at which the main Corporation Tax rate of 25 per cent applies. An employer contribution of £60,000 into a pension scheme would reduce taxable profits to £240,000, saving £15,000 in Corporation Tax at the main rate. This example is illustrative only. Where that contribution goes into a SSAS, the company may also gain the option to use the invested funds to support the business directly through commercial property or loanback, which a standard employee pension does not offer. Your own position will depend on your company's profits and circumstances, so treat this as a starting point for a conversation with a specialist rather than a calculation to rely on.

The April 2027 Inheritance Tax change

From April 2027, unused pension funds and death benefits will be brought into the value of a person's estate for Inheritance Tax purposes. This applies across registered pension schemes generally, including both a SSAS and a standard employee pension, so it does not favour one structure over the other when comparing Corporation Tax savings. It is, however, a material change to how pension wealth is treated on death, and directors should factor it into wider succession planning alongside their Corporation Tax decisions. A tax planning specialist like TLPI can help you plan around this change as part of a broader strategy.

Which suits which situation

A SSAS tends to suit companies with a small number of directors who want ongoing control over how pension funds are invested, and who see value in being able to use those funds to support the business itself through commercial property or loanback.

A standard employee pension may suit businesses that need a straightforward, scalable scheme for a broader workforce, where administrative simplicity matters more than investment flexibility.

Some companies use a SSAS for directors alongside a standard workplace pension for the wider team, combining flexibility where it matters most with simplicity everywhere else.

Key takeaways

• Employer contributions to a SSAS or a standard employee pension are both generally deductible against Corporation Tax, subject to HMRC's wholly and exclusively test.
• A SSAS gives directors more flexibility to size and time contributions, and the option to invest in commercial property.
• Loanback allows a SSAS to lend up to 50 per cent of its net asset value back to the sponsoring employer, an option not available through a standard employee pension.
• Both scheme types are measured against the member's Annual Allowance, currently £60,000 for most people.
• From April 2027, unused pension funds and death benefits in both scheme types will be brought into the value of the estate for Inheritance Tax purposes - a change worth factoring into wider planning.
• The right choice depends on the number of directors involved, the company's profits, and how much control and flexibility the business wants over its pension funding - best decided with specialist input.

Choosing between a SSAS and a standard employee pension is a decision worth making with a clear view of your company's Corporation Tax position and wider objectives. TLPI's pension specialists work with company directors to structure pension arrangements that support both tax efficiency and the business itself.