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Taking Benefits

Is your pension frustrating you and your ambitions?

If you’re the member of an SSAS pension you can start drawing benefits from the age of 55 (57 from 2028). Like all personal or workplace pensions you can choose to take the first 25% of your pot as a tax-free lump sum or receive 25% of each withdrawal tax-free.

The amount of benefits you’re entitled to will depend on how much you and your employer have contributed to the scheme, how long each contribution has been invested and the performance of the investments.

After the tax-free amount, withdrawals will be subject to your normal rate of income tax. You can choose to take your pension as an income either by purchasing an annuity, or via income drawdown. Here at Empowered Trustees, we can help and guide you on the best option for you.

Lifetime allowance When a member’s benefits come into payment they will be tested against a ceiling known as the lifetime allowance. 

Unless a Member has some form of protection, the standard lifetime allowance is the upper limit on benefits that a Member can crystallise in aggregate in all of their registered pension schemes, without incurring a lifetime allowance tax charge.

Each time a Member takes new benefits a portion of their lifetime allowance is used up. The standard lifetime allowance currently increases each year in line with any increase in the Consumer Price Index. 

For the tax year 2021/22 it is £1.0731 million. Retirement A Member can normally start to take their benefits at any time from age 55, whether or not they remain in employment. 

When a Member crystallises part or all of their share of the SSAS fund, up to 25% of the amount crystallised can normally be taken as a tax-free pension commencement lump sum (provided the Member has enough remaining lifetime allowance).

The remaining amount of crystallised funds can only be used to provide drawdown pension and/or to buy an annuity from an insurance company. The drawdown pension or annuity payments will be assessable income for tax purposes.

Ceasing employment If a Member ceases to be employed by a sponsoring employer at any time, they will normally have the following options in relation to their share of the SSAS fund: > transfer it to one or more other registered pension schemes and cease to be a Member, a Trustee and Scheme Administrator of the SSAS > buy one or more (deferred) lifetime annuities in their own name from one or more insurance companies of their choice and cease to be a Member and a Trustee of the SSAS > keep it in the SSAS, remain as a Member and a Trustee and take benefits from it as and when required. 

When considering these options, a Member will need to bear in mind that some of the SSAS investments may be illiquid and may take a while to sell or that they cannot be transferred in-specie (i.e. the receiving scheme cannot accept, or is not willing to accept, the transfer of ownership of assets and they will need to be sold and the cash proceeds transferred) and that charges will apply.

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