UK citizens are not allowed to hold cryptocurrencies in their personal pensions. So, if you are looking for a way to profit from the volatile cryptocurrency market, there are two ways to do so.
You can buy shares in companies in the cryptocurrency industry or create your own self-administered mini program (SSAS).
What is an SSAS pension?
SSAS pensions are a form of workplace pension which can be dealt with entirely by the company setting it up. They do not involve any dealings with banks and are usually designed by directors and other senior managers to offer better retirement benefits and increased investment flexibility. It is most commonly found in small or family-owned businesses but can be open to all employees and their families.
SSAS annuities give greater control over investment choices than traditional pension plans. Your investment SSAS pensions The use of cryptocurrencies is considered safe and legal in the UK as long as it follows the rules and regulations set by HM Revenue and Customs. Platforms like Coinpass provide easy integration and compliance with these regulations.
Why you should consider cryptocurrency for your SSAS pensions
Cryptocurrencies are modern assets that are not closely aligned with traditional pension holdings and therefore offer additional benefits, including:
diversification
Diversification is one of the primary benefits of adding cryptocurrencies to your SSAS pension. Cryptocurrencies They are not part of any central market and therefore constitute a completely different asset class. Incorporating cryptocurrencies into a pension portfolio allows investors to diversify away from stocks, bonds, real estate, etc., which can reduce risk and even offer the potential for greater returns.
Possibility of achieving better returns
Cryptocurrencies are known for their high growth potential. Bitcoin price history It appears 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 further growth in the coming years.
Protection against inflation
Cryptocurrencies, especially those with real-world use cases like Bitcoin, are inflation-resistant. These forms of digital currencies are rare and do not face inflationary pressures like fiat currencies, offering the potential to maintain purchasing power over the long term.
Tax exemptions
Members will receive tax relief on contributions they make to an SSAS pension. Basic rate taxpayers get a 25% increase. Higher rate taxpayers may also claim additional tax relief through their self-assessment tax returns.
A way to invest in the company
SSAS also allows directors to buy shares in their company (up to a maximum of 5%). Businesses can also take out a loan from their SSAS pensions to fund their business at a lower interest rate than traditional business loans from banks.
How to set up your SSAS pension
Here are the steps to register your SSAS pension.
Step 1: Establish trust
This will be the legal entity that controls the scheme. The Trust Act and Regulations set out the details of the scheme, such as membership criteria, donations and investments.
Step 2: Review the rules and regulations for your pension scheme
Make sure your SSAS provider offers investments in cryptocurrencies and the conditions under which they are permitted. Some schemes can limit the assets you can put into them.
Step 3: Register your SSAS with HMRC
Registration involves providing information about the trustees, members and the scheme. If approved, you will be given a pension scheme tax reference number.
Step 4: Create at least two SSAS trustees
The Trustees will manage and operate the Superannuation Fund. Trustees need to be able to make smart investment decisions, so if you want to deposit some bitcoin or cryptocurrencies into the scheme, they should know what’s going on.
Step 5: Fund your scheme
If HMRC approves the scheme, it must be funded. Contributions are tax deductible, but there are annual caps, and trustees must keep contributions within these limits to avoid penalties.
Step 6: Choose the strategy
An SSAS is an investment vehicle that can contain many types of investments, such as commercial real estate, stocks, and cryptocurrencies. Therefore, it is important to choose how much of your wallet will be held in cryptocurrencies. A common rule of thumb is to be modest and invest only a small percentage of your overall portfolio.
Step 7: Select your cryptocurrencies
If you are familiar with the cryptocurrency market, you should know Good tokens for long-term investments. Choose popular cryptocurrencies with realistic use cases and great liquidity. These currencies, such as Bitcoin and Ethereum, are considered less volatile and relatively safe. You can change your portfolio to reduce exposure to one currency.
Step 8: Rebalance your investment portfolio from time to time
Cryptocurrency markets can change quickly. You must monitor and continually rebalance your portfolio to achieve returns as the market evolves. Depending on your asset allocation, this could mean buying more cryptocurrencies at low prices and selling some at high prices.
Crypto integration for retirement
Introducing cryptocurrencies 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 cryptocurrencies into your retirement account and start looking forward to a potentially lucrative financial future.