SSAS for Legacy Planning: how to protect and Pass on your Wealth

Introduction

When it comes to securing the financial future of your family or business, effective legacy planning is key. However, many business owners overlook the potential of their pension schemes when it comes to protecting wealth and passing it on to future generations. A Small Self-Administered Scheme (SSAS) offers unique advantages in legacy planning, providing both financial flexibility and tax benefits.

In this blog, we’ll explore how SSAS pensions can be used as a strategic tool for legacy planning, helping business owners protect their wealth, minimise inheritance tax, and ensure that their assets are passed on to the next generation in a tax-efficient manner

What is SSAS and How Can It Help with Legacy Planning?

A Small Self-Administered Scheme (SSAS) is a flexible pension plan designed specifically for business owners and company directors. SSAS allows pension holders to have full control over their investments, enabling them to make strategic decisions based on their business goals.

When it comes to legacy planning, SSAS pensions provide significant advantages. For example, the assets within the SSAS are outside your estate for inheritance tax (IHT) purposes, meaning that they are not subject to the 40% IHT charge when passed on to your beneficiaries. This can be a powerful tool for wealth preservation and intergenerational wealth transfer.

How SSAS Can Help Minimise Inheritance Tax (IHT).

1.Assets Outside Your Estate

One of the most significant advantages of a SSAS for legacy planning is that the pension fund sits outside your estate for inheritance tax purposes. This means that any assets held within the SSAS, including commercial property, business shares, and other investments, are not subject to the 40% inheritance tax charge upon your death.

By ensuring that your wealth is held within the SSAS, you can protect a large portion of your assets from IHT, which is particularly important for business owners who want to pass their business on to the next generation without incurring significant tax liabilities.

2. Tax-Free Transfers to Beneficiaries

When you pass away, the remaining funds in your SSAS can be passed on to your beneficiaries—typically your children, spouse, or other family members—without incurring inheritance tax. The assets will remain within the SSAS, and your beneficiaries can choose to take a lump sum or income from the pension, which will be subject to their personal tax position at the time. This offers a tax-efficient way to transfer wealth and ensures that your family benefits from the growth of your SSAS investments.

3. Spousal Benefits

Another key advantage of SSAS pensions for legacy planning is that they can benefit your spouse upon your death. Your spouse can inherit your SSAS and become a member of the pension scheme. This allows them to continue receiving tax-free growth on the assets within the SSAS, ensuring that your wealth continues to grow in a tax-efficient manner even after your death.

Using SSAS for Intergenerational Wealth Transfer

 The SSAS provides a mechanism for intergenerational wealth transfer. Here’s how it can help ensure your family continues to benefit from your wealth

1. Adding Family Members as Scheme Members

A key feature of SSAS is that you can add family members as members of your SSAS. This is particularly valuable for business owners who want to pass on their business and pension wealth to the next generation. By adding family members to the SSAS, you ensure that the wealth in the pension is distributed among them without incurring IHT.

Additionally, by making family members, members of the SSAS, they can benefit from the tax-free growth and income generated by the pension, even after you pass away.

2. Control Over How and When Wealth is Transferred

Unlike other forms of wealth transfer, such as gifts or inheritances, SSAS pensions give you control over how and when your wealth is transferred. You can designate specific beneficiaries and choose how the wealth is distributed—whether in a lump sum or through periodic withdrawals—providing you with flexibility in how your legacy is passed on.

Setting Up Your SSAS for Legacy Planning

To make the most of SSAS for legacy planning, it’s essential to work with financial and legal professionals who specialise in pension planning and inheritance tax. Here are the key steps involved in setting up your SSAS for legacy planning:

Step 1: Establish a SSAS

The first step is to set up a SSAS if you don’t already have one. This can be done by working with a pension provider or trustee who specialises in SSAS schemes. It’s important to ensure that the SSAS is properly established and compliant with HMRC regulations.

Step 2: Fund Your SSAS

Once your SSAS is set up, you’ll need to fund it. Most business owners fund their SSAS through employer contributions, which are tax-deductible. You can also transfer existing pensions into the SSAS to consolidate your retirement savings.

Step 3: Add Family Members

You can add family members, such as your children or spouse, as members of the SSAS. This will allow them to inherit your pension wealth and benefit from the tax advantages of SSAS, including tax-free growth and income.

Step 4: Set Up a Legacy Strategy

Work with your pension trustee and financial planner to establish a legacy strategy for your SSAS. This may include designating beneficiaries, ensuring that the pension fund is structured to minimise IHT, and determining how wealth will be distributed upon your death.

The Role of SSAS in Succession Planning

Succession planning is a critical part of legacy planning for business owners. A well-structured SSAS can play a central role in ensuring a smooth transition of both your business and wealth to the next generation. Here’s how SSAS can support your succession plan:

• Business Ownership Transfer: If you own a business, your SSAS can hold shares in that business, making it easier to transfer ownership to your children or other family members without incurring a heavy tax burden.”

• Smooth Business Transition: By using SSAS for succession planning, you ensure that the financial aspects of the business—such as property and shares—are managed efficiently, avoiding potential conflicts and legal hurdles after your death.
  

Plan for the Future with SSAS

A SSAS pension is a powerful tool for business owners looking to protect their wealth, minimise inheritance tax, and pass on assets to the next generation. With its unique ability to hold assets outside your estate, tax-free growth, and flexible wealth transfer options, SSAS is an ideal solution for legacy planning.

If you’re ready to explore how SSAS can help you secure your family’s financial future, book a consultation with Retirement Capital today. Our team is here to guide you through the process of setting up your SSAS and developing a comprehensive legacy plan that will protect your wealth for generations to come.