Table of Contents
UK citizens are not allowed to hold cryptocurrency in their personal pension. So if you are looking for a way to profit from the volatile crypto market, there are two ways to achieve this.
You can buy shares in crypto industry companies or set up your own Small Self-Administered Scheme (SSAS).
What is an SSAS pension?
SSAS pensions are a form of occupational pension that can be handled entirely by the company that set it up. They do not involve dealing with banks and are usually designed by directors and other senior managers to provide better pension benefits and greater investment flexibility. They are most common in small or family-owned businesses, but can also be open to all employees and their families.
SSAS pensions provide more control over investment choices than conventional pension schemes. Investing your SSAS Pensions in cryptocurrency is safe and legal in Britain as long as it follows the rules and regulations set out by HM Revenue & Customs. Platforms such as Coinpass ensure easy integration and compliance with these regulations.
Why you should consider cryptocurrency for your SSAS pension
Cryptocurrencies are modern assets that are not closely aligned with more conventional retirement investments and thus offer additional benefits, including:
Diversification
Diversification is one of the key benefits of adding cryptos to an SSAS pension. Cryptocurrencies are not part of a centralized market and are therefore a completely different asset class. Including cryptocurrencies in a retirement portfolio allows investors to diversify away from stocks, bonds, real estate, etc., which could lower risk and even offer the potential for higher returns.
Potential for better returns
Cryptocurrencies are known for their high growth potential. Bitcoin’s price history shows that it initially started at $0.10 and is now worth over $90,000. In 2024 alone, the global cryptocurrency market grew by 68%, with the potential for more growth in the coming years.
Protection against inflation
Cryptocurrencies, especially those with real use cases like Bitcoin, are considered resistant to inflation. These forms of cryptocurrency are scarce and do not face inflationary pressures like Fiat currencies, offering the opportunity to maintain purchasing power over the long term.
Tax benefits
Members receive tax relief on contributions they make to the SSAS pension. Taxpayers with the basic rate receive a supplement of 25%. Taxpayers with a higher rate can also claim additional tax relief through their tax return.
A way to invest in the company
SSAS also offers directors the opportunity to purchase shares in their company (up to 5%). Businesses can also get a loan from their SSAS pension to finance their business at a lower interest rate than conventional business loans from banks.
How to set up your SSAS pension
Here are the steps to register your SSAS pension.
Step 1: Create a trust
This will be the legal entity that administers the scheme. The Trust Act and regulations define the specifics of the program, such as membership criteria, donations and investments.
Step 2: Review the rules and regulations of your pension plan
Make sure your SSAS provider offers investments in cryptos and the conditions under which this is allowed. Some plans may even limit the assets you can put into them.
Step 3: Register the SSAS scheme with HMRC
Registration involves providing information about the trustees, members and the scheme. If approved, you will receive a tax reference number of the pension scheme.
Step 4: Establish at least two SSAS trustees
The trustees will manage and govern the pension fund. Trustees need to be able to make smart investment decisions, so if you want to put some Bitcoin or crypto into the plan, they need to know what’s going on.
Step 5: Fund your arrangement
If HMRC approves the plan, it must be funded. Contributions are tax-free, but there are annual caps and trustees must keep contributions within these limits to avoid penalties.
Step 6: Choose a strategy
An SSAS is an investment vehicle that can hold many types of investments, such as commercial real estate, stocks and cryptocurrencies. So it is important to choose how much of your portfolio will be held in crypto. A popular rule of thumb is to be modest and invest only a small percentage of your total portfolio.
Step 7: Select your cryptocurrencies
If you are familiar with the crypto market, you should check out the tokens that are good for long-term investments. Choose popular cryptocurrencies with real-world examples and deep liquidity. These coins, such as Bitcoin and Ethereum, are less volatile and relatively safe. You can vary your portfolio to reduce exposure to a single coin.
Step 8: Rebalance your portfolio occasionally
Cryptocurrency markets can change quickly. You must continually monitor and rebalance your portfolio to maintain returns as the market evolves. Depending on your asset allocation, this could mean buying more cryptocurrency at low prices and selling some at high prices.
Crypto integration for retirement
Introducing crypto into your SSAS pension is a great way to enrich your retirement savings with a new asset class that can deliver strong returns. However, you must do this with a clear view of the risks and a well-defined plan. If you plan well and follow best practices, you can easily integrate crypto into your retirement account and look forward to a potentially lucrative financial future.