Taking Retirement Benefits from your SSAS
You can take benefits from your SSAS any time after age 55. You can use the assets in your SSAS to provide some or all of the following benefits:
Tax-free cash
You can take a tax-free cash lump sum of up to 25% of your fund (subject to the lifetime allowance). In certain circumstances it may be possible to draw more than 25% of your fund as tax-free cash. SSAS Practitioner will unlock this extra tax-free cash where available. There is no requirement to cease working to take benefits.
Annuity
You can buy an annuity from an insurance company. Comparison quotes
Income Drawdown
You can use SSAS assets to provide you with a regular income using Income Drawdown. This can be varied to suit your tax requirements and personal needs. You take between 0% and 100% of your HMRC-allowed entitlement (the amount you can take depends on your fund value).
There are two alternatives available when it comes to taking income Drawdown:
Capped Drawdown
This is an option to draw an income for life from the SSAS, within an annual limit, without having to purchase an annuity. It can start at any time from age 55, and can continue beyond age 75.
Under Capped Drawdown, the tax rate on the remaining pension fund at death is 55%, irrespective of age. There is no tax on pension funds where death occurs before benefits have been taken (up to age 75), or on sums left to charity.
Capped Drawdown allows a pension to be paid up to a maximum amount every year. The maximum is set at 100% of the GAD (Government Actuary Department) rates. The maximum income limits are reviewed every 3 years before age 75 and annually after age 75. Under Capped Drawdown there is no minimum income requirement after age 75, substantially enhancing the flexibility of drawdown for the over 75s. Any income drawn from your SSAS by way of Capped Drawdown is subject to income tax.
Use our Income Drawdown Calculator to determine the maximum income available from Capped Drawdown.
Flexible Drawdown
Those with secure incomes from elsewhere of over £20,000 pa have no limit on the income they can take from their SSAS via Flexible Drawdown. Like Capped Drawdown, Flexible Drawdown can start at anytime from age 55, and a single tax rate of 55% will apply on death to any remaining funds in the scheme, irrespective of age. There is no tax on pension funds where no benefits have been taken (up to age 75), or on sums left to charity. Any income drawn from your SSAS by way of Flexible Drawdown is subject to income tax.
Flexible Drawdown is an option that gives those with large funds more flexibilty than everyone else. The £20,000 pa income required to satisfy the new minimum income requirement (MIR) can include the basic state pension, additional state pension and level annuity income. The lump sum required to purchase an annuity sufficient to satisfy the MIR, assuming the full state pension is also payable, will be about £200,000 under prevailing annuity rates.
SSAS members considering Flexible Drawdown should bear in mind that transferring a large amount of money from their pension fund into their estate, possibly at a top tax rate of 50%, might not make a lot of financial sense. Leaving it in a tax-exempt SSAS, taking annual pension withdrawls at maybe a lower rate of tax and having a 55% tax charge (but no IHT) on any residual lump sum upon death may be more attractive. SSAS members should seek financial advice before deciding upon Income Drawdown, particuarly Flexible Drawdown. Those who are considering Flexible Drawdown may be put off by the idea of buying an annuity to cover their minimum secure income requirement, maybe costing £200,000 or more.
Phased Retirement
Phased Retirement allows tax-free cash and an income to be taken from your fund in a way that reduces tax liability on death.
Scheme Pension
A guaranteed annual income from your fund regardless of the SSAS's investment performance. Available with guarantees, ie the pension will continue be paid to dependants after your death.
Depending on your SSAS investments, the timing of some of these options may be limited. For example, if your SSAS is invested in commercial property, it may take some time for the property to be sold.
SSAS Practicioner.com can help with the planning of investments and payment of benefits to ensure the required cash is available in your scheme. To see what your pension under Capped Drawdown is likely to be after taking tax-free cash, please see our drawdown calculator. There is no need to retire from employment or give up any directorships before taking benefits from the SSAS.