a SSAS can lend money to your business.
plus it can also lend money to a third party.
you can charge a commercial rate of interest and the
money is paid back to your pension rather than
a bank or other lender.
So, consider the basic scenario.
You’re looking for finance for a project but don’t want to or can’t approach a bank?
Your company might be looking for funds to assist in financing its expansion or acquiring assets, or it has some development projects in mind.
Where can you go?
Well, alongside the traditional routes of looking for finance, there is the option of using your pension.
You can establish a certain type of pension scheme known as a SSAS and transfer monies in & make contributions.
A SSAS allows you to take control of your pension monies in a far more flexible way than normal pensions might do.
A SSAS is established by a ‘Sponsoring Employer’. This is normally the company that you own, control and operate.
In addition, you are appointed as a Trustee of the SSAS. This is one of the key ingredients as it gives you a huge amount of control over what you do with the pension scheme.
And one of those things that you can do is buy commercial property.
The loan is subject to certain conditions that are laid out by HM Revenue & Customs.
For example, the maximum amount you can lend is 50% of the value of your pension.
The money released by the pension scheme must be used for commercial purposes, and you should charge a commercial rate of interest for lending the money.
One of the other conditions is that in return the business must give security for the loan.
The security needs to be assets that the pension scheme can be given a first charge over.
They don’t have to be owned by the company, and the assets don’t have to be commercial property – any asset that can have a first charge placed against them might be suitable.
The maximum loan term is five years, so the company must repay the loan over this period.
Repayments have to be equally split over this period. This ensures that the pension scheme receives its money back evenly over the period which it can then use for other investments.
If required, the loan can potentially be rolled over for a further five years.
Once it’s set up and running, you have the satisfaction of paying your own pension scheme rather than another landlord!
The biggest challenge is deciding what you will do next as the rental monies accumulate over time!
third party loans
A SSAS is the only type of pension scheme that can allow you to lend to your company.
It is also possible to arrange loans to other parties as well. These are known as ‘third party loans’.
‘Third party’ means a company or business that is not linked to you – so, you can’t lend to a family member’s business, for example, or to a company that you own which isn’t a Sponsoring Employer.
These loans are not subject to the same strict requirements – so you have more flexibility, but there can be greater risk.
You need to think about the following elements:
Borrower – how much do you know about them? Have you done your ‘due diligence’?
Term – how long are you going to lend the money for? What about repayments? How regular will they be?
Interest rate – if the loan is not as secure as to your own company how much interest should you charge?
Security – unsecured loans are very high risk, so consider security options and how much risk you can take?
talk to us now about establishing your SSAS
and the services we can provide
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