The benefits of a SSAS pension for business owners

Tax efficiency isn’t just a year-end concern. For many business owners, it’s one of the most powerful tools for building lasting financial security, both inside and outside the business.

A SSAS offers the rare opportunity to align your retirement planning with your business performance. Done properly, it allows you to move money from your company into your personal pension in a way that minimises tax and maximises flexibility.

One of the most immediate advantages of a SSAS is that employer contributions are usually tax-deductible. That means your company can contribute to your pension and reduce its corporation tax liability at the same time.

Let’s say your company contributes £40,000 into your SSAS. That amount can usually be offset against profits resulting in a potential corporation tax saving of up to 25%, depending on your tax position.

It’s a straightforward way to move business profits into long-term, tax-efficient savings.

Because the contributions come from your business, not from your personal income, you won’t pay income tax or National Insurance on them. This is especially valuable if you’ve already reached higher income tax thresholds.

Rather than extracting money through dividends or salary and triggering additional tax liabilities, a SSAS allows you to redirect funds into your future in a far more tax-efficient way.

Once funds are inside your SSAS, your contributions can be invested in a wide range of assets including listed shares, commercial property, corporate bonds, and more. Crucially, any investment growth within the SSAS is free from both income tax and capital gains tax.

This allows your pension fund to grow more efficiently over time, building your wealth in a protected environment. And because you’re in control of the investment decisions (alongside your fellow trustees), the strategy can be tailored to your goals and risk appetite.

Another highly valuable benefit of SSAS pensions for business owners is how they support long-term family wealth planning.

In most cases, SSAS funds currently fall outside your estate for inheritance tax (IHT) purposes. This means the pension can be passed to beneficiaries, often free of IHT, depending on the timing and structure of the transfer.

Additionally, a SSAS allows for multiple members, including spouses and adult children, who can act as co-trustees. This structure offers a smooth way to involve the next generation, whether they work in the business or not, and to pass on financial knowledge along with assets.

However, recent changes announced in the Autumn Budget 2024 mean this may not always be the case in the future. From April 2027, pensions that remain unused at death, particularly lump sums, may no longer benefit from the current IHT exemptions. As a result, it’s more important than ever to consider how your SSAS fits into your broader estate plan, and to seek professional advice on how to navigate these changes effectively.

Here’s where SSAS really stands apart: it can loan up to 50% of its value back to your business, provided it’s done within HMRC rules and on commercial terms.

This can be a powerful source of business funding, especially for growth initiatives, property purchases, or equipment investments. The business benefits from a loan, while the pension fund earns interest, recycling value within your ecosystem.

This benefit makes SSAS particularly attractive for SME owners who need flexible funding options without sacrificing long-term planning.

A SSAS can also be used to purchase commercial property, such as your business premises. Here’s how it works:

• The SSAS buys the property outright (or with a mortgage).
• Your company leases the property from the SSAS, paying market-rate rent.
• That rent becomes income for the pension, tax-free.
• The business deducts the rent as a trading expense – tax-deductible.

This structure removes the asset from the company’s balance sheet, protects it from trading risks, and turns business rent into a personal retirement benefit. It’s a particularly efficient strategy for business owners with surplus profits and a need for commercial space.

Unlike some pension schemes that offer limited fund options, a SSAS gives you the flexibility to tailor your investment strategy.

You and your co-trustees can decide how to invest the fund, whether that’s diversifying across equities, acquiring property, providing loans, or holding alternative assets (subject to HMRC rules).

While the potential of a SSAS is significant, so too is its complexity. From regulatory compliance to loan-back rules and investment choices, there are many moving parts to manage.

Working with a financial planner experienced in SSAS pensions ensures:

• The scheme is structured in line with current tax rules.
• Contributions and withdrawals are optimised.
• Investments are diversified and compliant.
• Long-term goals, such as succession or retirement income, are built into the strategy.

A financial planner helps you make the most of your profits, and helps you steer clear of common pitfalls.

If you’re a company director or business owner looking for a more strategic approach to retirement and tax planning, a SSAS could be a valuable solution. It offers a level of flexibility, control, and tax efficiency that goes beyond most traditional pensions.

Whether you’re interested in supporting your business, passing wealth to your family, or simply making your retirement savings work harder, the benefits of SSAS pensions for business owners are well worth exploring.

At Amber River, our independent financial planners are here to support you in building a financial strategy that goes beyond the business.

Whether you’re exploring pension options, planning for succession, or simply want to better align your business with your personal goals, we’re here to help.

Important: Tax treatment depends on individual circumstances and may change in the future. Investments can go down as well as up. You may not get back the full amount you invested.