How To Put Bitcoin And Crypto Into Your Pension Fund Using A SSAS

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If you want to put Bitcoin or any other cryptocurrency into your personal pension, you’re going to hit a brick wall.

At present, you can’t directly hold crypto in your Self-Invested Personal Pension (SIPP) in the UK. However, there is another option – a Small Self-Administered Scheme (SSAS) for company directors.

Nor can you include crypto tracker funds in your pension after they were banned by the Financial Conduct Authority (FCA) who felt they were too risky.

So, if you’re looking to add crypto exposure to your personal pension there are very few options left, other than to buy shares in firms involved in Bitcoin mining or blockchain infrastructure.

However, there is another way of adding Bitcoin and crypto to a pension that not many people know about.

If you have a UK-registered company, you can set up your own Small Self-Administered Scheme (SSAS).

This type of pension enables you to become the trustee running the pension scheme, meaning you’ll be able to decide which investments to include in it, such as Bitcoin or other cryptocurrencies.

What is a Small Self-Administered Scheme (SSAS) pension?

A SSAS is a type of pension that offers business owners and directors the chance to take control of their retirement savings.

The beauty of a SSAS is that it offers a high degree of flexibility and control over investment decisions and gives you greater autonomy in managing your own funds.

This means that you can add investments to your pension – such as Bitcoin and cryptocurrency – that may not be on offer by a traditional provider because they’re seen as too risky.

With a SSAS, you can set the risk profile of the investments the scheme includes.

A SSAS allows members, usually consisting of company directors and key employees, to pool their pension funds to take advantage of the broader range of investment opportunities the scheme offers.

How do I set up a SSAS for Bitcoin and crypto?

There are certain steps you need to take to set up your SSAS pension.

They include:

1. Form a trust which will act as the legal entity governing the scheme. The trust deed and rules outline the specific provisions of the scheme, including membership criteria, contributions and investments.

2. Register the SSAS scheme with HMRC. This involves supplying details about the trustees, members and the scheme itself. If approved, you’ll receive a pension scheme tax reference number.

3. Appoint a minimum of two SSAS trustees. The trustees will be responsible for the management and administration of the pension scheme. Trustees should be able to make informed investment decisions so if you plan on putting Bitcoin or crypto in the scheme, they need to understand how it works.

4. Once the scheme is approved by HMRC it needs to be funded. Contributions receive tax relief, subject to annual allowances and trustees need to ensure contributions stay within these limits to avoid any penalties.

5. Establish an investment strategy. Here’s where it gets interesting when it comes to putting Bitcoin or cryptocurrency in your pension. One of the key advantages of a SSAS as I’ve already mentioned is the freedom to invest in a wide range of assets. Aside from crypto, this includes commercial property, stocks and shares and even loans.

The advantages of a SSAS pension include:

• Enhanced control and flexibility because individuals act as the trustees of their own pension fund, hence Bitcoin and crypto can be added into it.
• A SSAS offers an added layer of asset protection for pension funds. By establishing a trust structure, the assets held within a SSAS are legally separate from the sponsoring employer. This mitigates the risk of the pension being impacted by the financial difficulty or insolvency of the employer.
• For small businesses, a SSAS can be an important tool for business and succession planning. One feature of a SSAS is that it enables loans to be made to the sponsoring employer to fund expansion, acquisition or the purchase of commercial property. A SSAS also helps with the smooth transfer of the business to the next generation.
• Provides the opportunity for family involvement in retirement planning as the SSAS members could be related. This enables the pension scheme to pool resources and take advantage of collective investment opportunities.
• Various tax advantages (see below).

Tax advantages of a SSAS pension scheme for your Bitcoin portfolio

There are various tax advantages to holding assets in a SSAS pension. They include:

• They are Inheritance Tax (IHT) free.
• There is no tax to pay gains, including gains on Bitcoin and crypto.
• Investment income, such as staking rewards (earnings from your crypto) are tax free.
• Tax deductible for the sponsoring employer, reducing their taxable profits.
• Up to 25% of the fund can be taken as a tax-free lump sum, with the remaining balance providing a (taxable) income.

There are other advantages as well, but it’s important to set the SSAS pension up in the correct way to ensure you make the most of them.

The disadvantages of a SSAS pension include:

• Investment risk. Because SSAS trustees can choose their own investments, including high-risk asset classes such as Bitcoin and cryptocurrency, there is the risk that the assets may perform poorly. Without the necessary expertise, those running the scheme might fail to make properly informed decisions.
• SSAS schemes can suffer from illiquidity issues and a lack of flexibility when it comes to accessing the funds. Having a SSAS pension may restrict a member’s ability to respond to unexpected financial needs or a change in their circumstances.
• Stringent regulatory compliance. The compliance and reporting obligations of a SSAS require a high degree of specialist knowledge and can be time-consuming. Failure to comply can result in penalties, lost tax advantages or even lead to the scheme being shuttered.

Managing your SSAS and ensuring compliance

An important part of running a SSAS scheme is ensuring that it complies with the regulatory requirements involved.

This includes accurate record-keeping, reporting to HMRC, preparing annual accounts and communicating regularly with scheme members.

It’s also essential that you comply with The Pensions Regulator’s guidance to avoid any issues which could potentially lead to the scheme being disqualified.

For more information see the Government’s guidance on managing a registered pension scheme.

How to set up a SSAS pension for Bitcoin and cryptocurrency

Setting up a compliant SSAS scheme is fairly complex as you’ll need to take into account various legal, regulatory and tax considerations.

It’s advisable to consult with a qualified pension specialist or financial adviser who is knowledgeable about SSAS schemes and cryptocurrency.

They’ll be able to guide you through the process of setting up a SSAS and including crypto investments in a compliant way.

How does a SSAS differ from a Self-invested personal pension (SIPP)?

SSAS’s are individually registered pension schemes governed by their own trustees.

As we’ve already seen, this means the trustees can decide exactly which investments are held in the scheme and in what proportion.

Because a Sipp is provided by a third-party, it has to abide by the rules set by them, which includes which investments are allowed and which aren’t.

Pension providers are currently shying away from crypto due to concerns about its volatility and long-term viability as an asset class.

Final word

Setting up a SSAS gives you the freedom to set the level of risk and choose the assets that are included in your pension in a tax efficient way.

This means that you can add Bitcoin and other cryptocurrencies into your pension without any restrictions.

It’s important to bear in mind that Bitcoin and crypto is a high-risk investment and subject to extreme market volatility.

There’s no guarantee that the price will increase in the future, with some commentators even predicting that its price could go to zero.

You should think carefully about how much of your SSAS pension portfolio you keep in crypto and accept that you could potentially lose a significant amount of money.

Related post: Can I put Bitcoin and crypto in my pension, SIPP or ISA?