SIPP vs SSAS – What are the differences?

Choosing the right pension can make a big impact on your retirement. Self-invested personal pension (SIPP) and small self-administered schemes (SSAS) are two types of defined contribution pension options may be available to you. Understanding their differences can help you to pick the right one to fit your needs.

Both options give you a wide range of investment options, and as with all investments their values can go down as well as up and is not guaranteed. You may not get back the amount you put in. Consulting with a financial adviser can help you decide if a SIPP or SSAS is the right choice for your retirement planning.

A self-invested personal pension (SIPP) is a type of personal pension which comes with tax efficiencies that can help you to grow your retirement savings. 

When you put money into a SIPP, the government adds to it as a way of giving you back some of the UK Income Tax you've paid. For every £80 you contribute, the government adds another £20, effectively giving you back the 20% income tax you paid on that income. 

This is what’s often referred to as tax relief. If you’re a higher or additional rate taxpayer, you can claim even more back through your tax return. This tax relief system is designed to encourage you to save for retirement by making it more tax-efficient. 

While SIPPs offer a flexible and tax-efficient way to save for retirement, allowing you to invest in a wide range of assets, they come with risks. The value of your investments can go down as well as up, so you could get back less than you invested. And, as with all tax-related benefits, the rules around SIPPs and the tax relief you can claim depends on your personal circumstances and could change in the future.

Find out more about what a SIPP is.

What are the benefits of a SIPP?

SIPPs come with a host of benefits, including:

• A wide range of investment choices, including stocks and shares, bonds, funds, and sometimes even commercial property, which either you can manage yourself or with the help of a financial adviser. 
• Basic rate tax relief. For personal contributions you make up to the amount you earn, SIPPs can benefit from basic rate tax relief at 20%, higher and additional rate tax payers can claim extra tax relief by way of self-assessment. If you have no UK earnings, you can make personal contributions up to £3,600 a year including tax relief. 
• Estate planning advantages. You may be able to leave your SIPP to the people you choose, and it can be tax-free for them under certain conditions. If you pass before you're 75, the whole amount can be given to them without any income tax, subject to your remaining Lump Sum and Death Benefit Allowance. After 75, your beneficiaries may need to pay income tax on withdrawals they make from your SIPP. 
• Transparency and control. SIPPs offer a high level of transparency, and usually have online platforms that enable you to monitor and manage your investments in real-time. 
• Potential for higher returns. While there's no guarantee of higher returns, the wide range of investment options and the ability to tailor your investments to your risk tolerance can potentially lead to higher returns compared to traditional pension schemes.

A SSAS is a company pension scheme for no more than 11 members, usually including senior management or directors. Its members are also trustees in the pension, so they have direct control over investment decisions.

Please note, Aviva does not offer a SSAS pension product to customers at present. 

What are the benefits of SSAS?

SSAS members can also enjoy benefits that are similar to that of a SIPP, as well as some wider benefits including:

• Greater control and flexibility. Members, as trustees of the scheme, have control over investment decisions and can invest in a variety of assets, such as company shares or even the business’s premises. They can also lease assets back to the business. 
• Loan-back opportunities. A SSAS can lend money back to the sponsoring employer, which can be a useful source of finance for the company. This must be done under strict HMRC rules to ensure it's for legitimate business purposes and on commercial terms.
• Pooling of resources. SSAS enables multiple members to pool their pension savings, which could increase investment opportunities and share the costs of managing the pension.
• Estate planning and inheritance tax benefits. Like SIPPs, you may be able to leave your SSAS to the people you choose, and it could be income tax-free for them under certain conditions. If you pass before you're 75, the whole amount can usually be paid as a lump sum to your beneficiaries, free of inheritance tax and subject to your remaining Lump Sum and Death Benefit Allowance could be free of income tax. After 75, your beneficiaries may need to pay income tax on withdrawals they make from your SSAS.
• Employer contributions. Employers can make contributions to a SSAS. These are usually tax-deductible for the business, so it's a tax-efficient way to improve employee pensions.
• Tax-efficient retirement planning. The pension grows free from UK Income Tax and Capital Gains Tax.

While both SIPPs and SSASs are both great options for tax-efficient retirement savings, they’re designed for very different people with specific saving needs.

Setup and availability

A SSAS is set up by a company for its directors or senior staff, while a SIPP is available to anybody who wants to save for retirement.

Ownership structure

A SSAS is run by its members, who are also trustees, while a SIPP is a singple person's pension held within and run by a personal pension scheme. 

Connection to the workplace

SSASs are closely linked to the workplace, while SIPPs are personal pensions set up independently of employment, although an employer may contribute to a SIPP for their employee.

Management and control

In a SSAS, members act as trustees and, together, have direct control over the pension. A SIPP, however, is managed by the individual holder.

Investment flexibility

SSASs can lend to their sponsor company and invest in a wide range of assets, including company premises. SIPPs also offer a broad range of investments, but they cannot lend to the holder’s business.

Whether a SIPP or SSAS is right for you depends on your circumstances, how involved you want to be in managing your pension, and whether your retirement planning includes using your pension funds to support your business. 

If you’re planning for your future, you can visit the pensions section of our website to browse guides to start your pension, build your pension pot, and eventually get the best use out of your pension.