Martin Tilley

Martin Tilley
Chief Operating Officer

In his second article for SIPPs Professional, Martin Tilley looks at how selling a business can affect SSAS planning:

It is nearly 50 years since the concept of the Small Self-Administered Scheme (SSAS) was introduced and, despite their unique features as a retirement planning vehicle, it remains a much underused tool in the Financial Planning process.

Many thousands of small and medium-sized, and family-run businesses have benefited from them over the years.

Being a mature market, many of the companies that were early takers for this type of occupation pension scheme are now operating on the second or even third generation of membership. The ability to cascade wealth down through these generations in a single legal entity remains popular, and often the pension scheme remains intact, even after the sale or restructure of the original business.

With the requirement for an independent or “pensioneer” trustee removed over 15 years ago, some SSASs operate without a specialist SSAS professional, but the sale of the company or business is one scenario when it would be prudent to engage one at early stage to avoid complications.

Much planning should take place well before any deal is even structured. If the ownership of the company sponsoring the scheme is changing, it may be possible to adhere another associated employer to the scheme to whom the role of principal employer might be transferred.

A key consideration here will be understanding the scheme constitution and governance. SSASs are operated under a Trust Deed and Rules, which will outline with whom key powers, such as those to amend the scheme, adhere new employers and appoint and remove trustees, are vested. There are multiple versions of these documents in existence, so it is vital to know where the scheme will lay after the company sale, who will be continuing as members and structure this in advance of the company sale.

An impending company sale may also be the opportune time to consider any final funding opportunities for the members, or even to admit new members to the scheme who might benefit from such final funding. If employment may terminate on the sale, this may be the last time to make use of company sponsored contributions and any carry forward allowances available.

It may also be a suitable time to review consolidating any externally held pensions into the SSAS if that will be the chosen vehicle for the future. A feature of the Transfer Regulations introduced in November 2021, is that it is necessary to evidence an employment link to the scheme to which any transfer will be made. Where employment may terminate on sale, it should still be possible to make a transfer to a SSAS, but it will be a more prolonged process to convince the ceding scheme that the transfer should not be adversely flagged.

With company shareholders usually providing a high proportion of SSAS membership, a final but important part of the planning process will relate to the newfound liquid wealth of the scheme members following the sale. Almost certainly this will be the time to review any inheritance tax planning with the completion of a new will. I would advocate that on every occasion a will is reviewed, so too should be the members Expression of Wish forms relating to the value of the member’s entitlement of the SSAS.