How to avoid the Lifetime Limit within a SSAS – and still be able to make contributions

by | May 20, 2020

How To Sidestep the Pensions Lifetime Limit and have an UNLIMIED SSAS Pension Pot – Without using a QROPS!

Anyone with a half decent sized pension will be aware of the ‘Lifetime Limit” – which is imposed on the maximum size of pension fund you can ‘grow’ – before you are hit with hefty taxes. At the time of writing (May 2020) – the Lifetime Limit is £1.07m. Each year the limit will be increased in line with inflation, so the £1.07m will gradually creep upwards.

However, for many investors – especially those with a SSAS (Small Self Administered Pension Scheme), there is a risk that their investment returns will push them over this ‘limit’. Indeed, their growth may be high enough to mean that ongoing contributions to their SSAS (on which they get tax relief) will be curtailed.

So what can you do…?

Well – there is the ‘old’ chestnut whereby the pension fund is transferred into a QROPS (Qualifying Registered Offshore Pension Scheme) – which is called a ‘crystallisation’ event. This in effect takes the current pension’s value and uses up part (or all) of the Lifetime Limit. In theory all the growth that happens inside the QROPS is now ‘outside’ of the Lifetime Limit checks. However, this does nothing for the ability to continue to make tax relieved contributions into the pension.

As you would expect – there is another way:

If you can imagine your SSAS investment as a ‘race’ – the speed of the runner is determined by the rate of return on the investments. By switching runner, you can enable your SSAS investments to be running SLOWER than the inflation rate each year, meaning that your pension fund will never catch up or overtake the ‘Lifetime Limit’ of £1.07m.

So what happens to the rest of your growth? Surely the whole point of a self administered pension is to be free to make as much profit as you can (tax free)?

Well all you do is pass your SSAS investments over to an alternative tax exempt structure, with the SSAS being paid a fixed rate of 1% p.a from that point onwards. None of the investments need to be sold. This swap is done using special units and our good friend the QNUPS (Which is exempt from the Lifetime Limit, as well as the falling outside the restrictions on residential property investments too!).

If you have a significant pension and want to carry on making high yielding investments – then now is the best time to speak to us, as a simple restructuring will save you a lot of tax in the future. Using this ‘swap’ we can also make your retirement income more tax efficient as the money would not come from your SSAS, it would come from the other exempt structure.

Many business owners are unaware of the rules or how they can use their pensions – which is where we can help.

Paul Stewart (Our MD) is a Pensions Administrator (an official HMRC recognised role). He was also an Examiner for the Chartered Insurance Institute dealing with the exams IFA’s had to pass in order to give advice on …PENSIONS! So if there is anyone who can help guide you, then he can!

Most Advisors, such as IFA’s and Accountants do not have the internal experts to assess a client’s FULL situation – and come up with the best overall strategy.

As I have worked in the pensions and tax planning field for over 30 years, I have personal access to experts in all taxes and can combine these experts into a unique service that really does go beyond what you’d get from your normal ‘Advisors’.

Every wealthy entrepreneur or property investor I have ever met had their own Accountant, Solicitor and Financial Advisor – yet in 90% of cases we were able to dramatically able to improve their overall exposure to UK taxes and access to their pension money.

What is vital is the proper implementation – with care at every stage.

This is why we offer a FREE consultation – as it lets us explore your current situation before jumping in with ‘solutions’.

If you are interested in seeing if your pension can be used to help support your business – then call us now, or send us your details and we will call you back. 

We look forward to helping you soon.