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Small Self-Administered Schemes (SSAS): An independent guide to costs and pricing

We understand that setting up a SSAS is a huge decision and often financial milestone in somebody’s life and the prospect may be a little daunting, especially if it is on one of the first steps in taking control of their finances. Our objective is to equip you, by giving you honest and reliable information regarding SSAS pensions, to make this decision with confidence.

As you consider setting up a SSAS, this guide to costs will help you discover whether it is a cost-effective course of action that you will derive benefit from. SSAS pensions are not for everyone and there is a broad spectrum of different offerings out there to choose from.

Costs of SSAS: THE first thing to consider

There is a lot of noise around SSAS’s recently and demand is rising along with awareness. The first thing to ask is:

Do I need a SSAS?

A SSAS, while being very flexible tools for wealth creation and preservation, is a complex, costly beast to run and should not be created without consideration and comparison to other types of pension. There are numerous situations where a SSAS is unlikely to be beneficial, such as:

  1. You are not an employer – A SSAS is an occupational pension scheme and must be established by a bona fide employer, typically a limited company or limited liability partnership.
  2. You are just starting a pension – unless you have a sizeable amount of money to contribute to a pension, the costs of a SSAS are likely to be prohibitive and negate the tax advantages of having a pension in the first place.
  3. You already have a Self-Invested Personal Pension (SIPP)- SIPPs already have very wide powers of investment and can invest in all of the same asset classes as a SSAS. Approach your SIPP trustee to discuss your plans. They may be able to support your proposed investment activities.
  4. You don’t need the features of a SSAS – going to the trouble and expense of setting up a SSAS to merely invest in mutual funds etc is the equivalent of owning a Ferrari and leaving it in the garage.
  5. You live outside of the UK – put simply, there are less restrictive ways to invest in the UK than using a SSAS.
  6. You are too close to age 75- it is very difficult to fund a SSAS quickly enough to make it worthwhile beyond age 70. As with 5), there are different tools available if Inheritance Tax (IHT) planning is the main objective.
  7. You like things done for you – unless you want to be directly involved in the investment decision making process there is a little point in taking out a SSAS.

In most of the above scenarios another type of pension will likely be more suitable and better value. If you’ve decided that a SSAS is the best course of action for you, the next thing to decide is what service you require.

What do SSAS providers offer?

The SSAS industry comprises a diverse range of service providers from consultants operating out of their spare rooms through to global financial services powerhouses. This means that the offerings of the providers vary widely but they can be split down into 3 main services:

  1. Scheme Administrator – Under section 270 of the Finance Act 2004, the Scheme Administrator is responsible for the tax affairs of the scheme and for ensuring that it complies with its tax obligations.
    The scheme administrator’s duties include:
    • registering the pension scheme with HMRC;
    • operating tax relief on contributions under the relief at source system;
    • reporting events relating to the scheme and the scheme administrator to HMRC;
    • making returns of information to HMRC;
    • providing information to scheme members, and others, regarding the lifetime allowance, benefits and transfers.

      Some of the above duties may be delegated to a practitioner (see below) but the Scheme Administrator is liable for the payment of ant tax charges that may apply.
  2. Trustee – In addition to carrying out the duties of the Scheme Administrator, a professional SSAS trustee will provide formal support in the day to day running of the scheme along with being a co-signatory to the scheme bank account in conjunction with the member trustees. This provides an additional layer of oversight and guidance, giving more comfort to the member trustees.
  3. Practitioner – a SSAS practitioner will typically undertake most of the work of a Scheme Administrator but their role is limited to the tasks delegated to them which leaves the trustees free to pursue their own investment objectives. The reality is that some people like this freedom and are comfortable with it, others prefer the additional comfort of having a Scheme Administrator and/or professional trustee involved.

What do these services cost?

There are two main charges that typically apply to all SSASs. These are:

  1. Initial set up (or takeover) fee; and
  2. Annual fee

In addition to the above, there is a great variety of approaches to charging with some providers having low, headline annual fees and then adding fees for every individual scheme interaction and other who charge larger, more inclusive fees that provide a more comprehensive service as standard.

We maintain a comprehensive schedule of the fees of 25+ providers. Here is a range of costs for common elements of a SSAS:

  1. Scheme set up – from £500 to £2995
  2. Annual fee – from £500 to 1% of SSAS fund value (no cap)
  3. Property purchase – from minimum £275 to £1000+ (time costed)
  4. Annual property fee – from £0 to £1275
  5. Property disposal – from £250 to £600
  6. Loan advance – from £300 to £1000
  7. Annual loan fee – from £150 to £500

There is a myriad of other charges that providers levy in different scenarios and it would be impractical to list them all here. The above are a list that we find to be common for most of our clients and people we meet.

Typical lifetime cost of a SSAS

It is difficult to determine the lifetime of a SSAS due to there being so many variables regarding age at establishment and longevity of the members, However, a comparison of charges over 10 years should give a fair reflection of the total costs and allow for the amortisation of the set up costs over a reasonable period.

Year Total cost Cost analysis
1 £3,362-50 £1500 set up, £1250 annual fee, £612-50 property purchase
2 £1887-50 £1250 annual fee, £612-50 property annual fee
3 £1887-50 £1250 annual fee, £612-50 property annual fee
4 £1887-50 £1250 annual fee, £612-50 property annual fee
5 £2537-50 £1250 annual fee, £612-50 property purchase, £650 loan advance
6 £2212-50 £1250 annual fee, £612-50 property purchase, £325 loan annual
7 £2212-50 £1250 annual fee, £612-50 property purchase, £325 loan annual
8 £2212-50 £1250 annual fee, £612-50 property purchase, £325 loan annual
9 £2212-50 £1250 annual fee, £612-50 property purchase, £325 loan annual
10 £1887-50 £1250 annual fee, £612-50 property annual fee
Total £22,300  

NOTE: This example uses the median charges across all providers included in the research panel based upon a £200,000 pension fund. VAT is not included in these figures.

Things to look out for when considering SSAS charges

Due to the non-standard and unregulated nature of SSAS charging, it can be difficult for the layperson to compare likely set up and running costs of a SSAS and which can lead to hidden costs at a later date. Here are a few traps to look out for:

  1. Annual member fees – some providers may disclose an annual running cost for the scheme which may appear competitive and then have an additional annual fee per member. This can have a significant impact on the total fee charged.
  2. Annual property fees – while it is still more common that not to charge an annual fee in relation a property owned by the SSAS, there are providers out there who don’t.
  3. Annual loan fees – not all providers charge annual fees for loans but for the unwary these can make a serious dent (or even wipe out) returns on interest received if loans extend unexpectedly.
  4. Bank accounts – it is not uncommon for SSAS trustees to gravitate toward their business bankers to set up bank accounts for the scheme but many SSAS providers have their preferred relationships and will charge to use other banks.
  5. Transfers in – some providers charge for pension transfers to the SSAS, some don’t and some allow a specified number.
  6. Time-costed work – some tasks a SSAS provider might be required to undertake will be billed on a time-costed basis. It is worth checking up front and trying to agree a fixed fee to avoid any nasty surprises at a later date.
  7. Non-standard investment charge – Many providers charge a fee to undertake due diligence on a non-standard investment such as a loan note. This charge can be levied on you even if the provider has already done due diligence on the same investment for another client.

Other Considerations

Costs and charges are an important consideration when looking at setting up a SSAS but clearly are not the only points to consider. You should work out what type of transactions you want your SSAS to undertake and if they are complicated, numerous, non-standard or out of the ordinary you should discuss your requirements directly with a Trustee, Administrator or Practitioner of a couple of providers to get a feeling of who understands your requirements and who you will be comfortable working with over many years to come.

For more details on the information contained in this article please email us at info@indigotrustees.co.uk

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