The October 2024 Budget announced a fundamental change to the UK's pension landscape. From April 2027, assets held in Small Self-Administered Schemes (SSAS) – which frequently include the commercial properties leased to the members' own companies or loans made to these businesses – will be included in personal estates for Inheritance Tax (IHT) purposes.
SSASs were introduced by the UK Government in 1973. The intended benefits were explicitly to provide greater pension security and incentives for entrepreneurs by allowing pension funds to be invested in ways that could also support the company’s development.
This is the first time that these vital investment vehicles will be subject to estate taxation. The proposed change fundamentally misunderstands the nature and purpose of SSAS funds. They are not just passive savings pots; they are active investment vehicles, facilitating economic growth and development. Pension capital is often directly tied to the sponsoring business's operational stability and growth, ****for example, through the SSAS owning the factory, workshop, warehouse, office, or shop from which businesses trade.
This active contribution to economic growth via commercial property provision and business financing is being overlooked.
The Government’s own consultation documents suggest that policymakers have fundamentally misunderstood the nature of SSAS pension structures. These are not passive inheritance vehicles or “wealth shelters”; they are long-established occupational pension schemes created by Parliament in 1973 specifically to encourage entrepreneurship, long-term business investment and pension security.
Many SSASs own the very premises from which UK businesses trade — factories, workshops, warehouses, surgeries, offices and farms — while others provide secured loans to sponsoring employers. The proposed legislation risks treating productive business assets as though they were merely dormant personal savings accounts.
This is not simply a tax change. It is a retrospective recharacterisation of occupational pension structures that successive governments actively encouraged for more than 50 years.
Our campaign advocates a policy reconsideration that recognises the unique characteristics of SSAS funds, their crucial role in supporting UK enterprise, thus preventing damaging unintended economic consequences.
The proposed legislation is being presented as a measure to prevent pensions being used for “wealth transfer” rather than retirement provision. That argument may be directed at large unused liquid pension pots — but it fundamentally fails to recognise how many SSASs actually operate in practice.
SSASs are frequently built around long-term productive assets designed to generate retirement income through rents, leases and business activity — not through forced sale of capital assets. The Government’s proposals therefore risk damaging businesses, employment, investment and long-term economic stability in pursuit of a tax policy based on inappropriate assumptions.
Punitive double taxation In order to pay the 40% IHT, beneficiaries must draw down funds from the SSAS which are subject to income tax (45%). The result —an effective rate that can exceed 67%. Although HMRC now proposes allowing IHT to be paid directly from pension funds to reduce additional income tax exposure, this does not solve the underlying problem where SSASs are asset-rich but cash-poor. Commercial properties and business assets cannot simply be converted into cash within weeks without potentially catastrophic consequences.
A Fundamental Legal Question
A major issue largely ignored by the Government is that SSAS assets are generally not owned personally by the member at all.
The assets are legally held within pension trust structures administered by trustees for the purposes of the occupational pension scheme. Historically, this separation between personal ownership and pension trust ownership has been fundamental to the treatment of pensions outside the estate for Inheritance Tax purposes.
The proposed legislation appears to blur or bypass these long-established distinctions without properly addressing the legal and conceptual implications.
This raises serious questions regarding:
Retrospective breach of trust For five decades government guidance created a clear, legitimate expectation that sums placed in a SSAS would remain outside an inherited estate. Entrepreneurs relied on that promise when committing both capital and business assets to their pensions. Taxing those same funds now is a retrospective U-turn: it confiscates not only future growth but the original contributions made in trust of an IHT-free outcome.
For decades, governments actively encouraged business owners to place commercial properties and long-term investments into SSASs on the clear understanding that pension trust structures sat outside the member’s estate for IHT purposes. Many entrepreneurs therefore structured succession planning, retirement provision and business investment over 20–40 years in reliance upon those principles.
The proposed legislation retrospectively changes the tax treatment of structures established under entirely different long-term assumptions.
HMRC’s Own Consultation Reveals Important Misunderstandings
HMRC’s consultation documents repeatedly assume that pension assets must eventually be liquidated in order to provide retirement income or death benefits.
That assumption is incorrect for many SSASs.
Commercial properties held within SSASs can provide retirement income indefinitely through rental yield without requiring sale of the underlying capital asset.
The consultation statement that illiquid assets “already need to be liquidated” reveals a limited understanding of how many property-backed SSAS structures actually operate in practice.
This matters because legislation built upon incorrect assumptions risks creating serious unintended economic consequences.
Forced fire-sales of commercial property SSAS funds often own the factory, shop or office from which a sponsoring business trades. A sudden 40% death-duty bill leaves trustees no choice but to liquidate illiquid assets, often under distressed conditions and at substantial economic loss to both the family and the business. to raise cash for HMRC.
Illiquidity ignored Pensions are supposed to invest long term; the rule assumes every asset can be turned into cash overnight. That misreads the reality of commercial real estate and risks evicting viable firms from their own premises.