SSAS Pension Scheme Popularity on the Decline

The latest research by leading peer to peer platform, Sourced Capital, has revealed that the majority of trustees with a now labeled RSS pension scheme, formerly an SSAS pension scheme, are potentially sitting on millions of unused funds, with the latest data also showing the popularity of these schemes is starting to wane.

RSS pension schemes, formerly labelled as SSAS schemes, are widely recommended to owner-managed businesses and are a defined contribution pension scheme, created under a trust with fewer than 12 members or trustees.

They are generally refined to the employee and employers although other family members are able to join, with the schemes offering tax relief on the contributions made. The schemes can be inherited across family generations and as a pension, it cannot be accessed by personal or company creditors.

The schemes allow a company to borrow money in order to buy land or property and can then be leased back to the company which is very tax efficient. It also allows those in the scheme to borrow money for investments such as buying the company’s premises.

However, the figures show that in the last five years, the number of total RSS schemes has fallen on average by -0.7% a year. Declining across the last three years consecutively.

The total number of memberships has also fallen at an average of -0.4% a year, remaining flat so far in 2019-2020 and dropping over the two years previous.

Perhaps the most telling sign of the declining popularity of these schemes is the drop in contributions. Between 2018 and 2019 there was a drop of -0.25% but so far in 2019-2020, this climbed to a huge -8.54%.

Managing Director of Sourced Capital, Stephen Moss, commented:

“RSS pension schemes can be beneficial when it comes to their use within a business to borrow money for investment, but when you consider them within the wider investment picture and the returns they bring, it’s easy to see why their popularity is declining.

We know from dealing with numerous investors who are also involved in these schemes, that the vast majority are seeing no return and as many as 70% of RSS trustees are also sitting on their funds waiting for a project to materialise but don’t have the time or experience to see it through.

This is money that could be better invested and while remaining in bricks and mortar, an IFISAs provides a much more lucrative return. On average, the current RSS member has contributed £5,967 over the last year. Had this been invested in an IFISA, they could already be looking at a return just shy of £600.”

What is an IFISA?

The IFISA is a category of ISA which was launched in April 2016 for UK taxpayers and can provide returns as high as 10-12% an annum, although capital is of, course, at risk. Previously, there have been two main types of ISA: Cash ISAs and Stocks and Shares ISAs.

Similar to these ISAs, the IFISA allows you to invest money without paying personal income tax. This enables you to invest your money into the growing peer to peer market.

Like cash ISAs Each tax year, you get an allowance of up to £20,000 to put into IFISAs which you can distribute across your different ISAs should you wish to. In addition, you can transfer your previous year’s ISA investments into your IFISA.

Year
Type
Total schemes
Change – total schemes
Total memberships
Change – total memberships
Total contributions
Change – total contributions
2019-2020
RSS (formerly SSAS)
21,860
-0.46%
61,000
0.00%
£364,000,000
-8.54%
2018-2019
SSAS
21,960
-0.50%
61,000
-1.61%
£398,000,000
-0.25%
2017-2018
SSAS
22,070
-3.75%
62,000
-1.59%
£399,000,000
8.72%
2016-2017
SSAS
22,930
1.87%
63,000
1.61%
£367,000,000
-2.65%
2015-2016
SSAS / SRS
22,510
62,000
£377,000,000
Average Growth
N/A
-0.71%
N/A
-0.40%
N/A
-0.68%
Year
Type
Total schemes
Total memberships
Total contributions
Amount being sat on by trustees at 70%
Average contribution per trustee
Annual return via IFISA @ 10%
2019-2020
RSS (formerly SSAS)
21,860
61,000
£364,000,000
£254,800,000
£5,967.21
£596.72

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