How a SSAS Pension Scheme could be an ideal option for business owners
At times such as this when businesses may be looking for alternative ways to expand, they may often overlook their pension scheme. Especially so in the current climate, when lending from banks may be difficult. There is a particular type of pension vehicle called a Small Self-Administered Scheme (SSAS) which allows scheme members to use their fund to loan money back to their business.
What is a SSAS?
A SSAS is an occupational money purchase scheme which is established by a limited company and the member trustees are usually company directors, key workers or family.
SSASs are legislated by HMRC so there are conditions to making the loan:
The loan must be secured for the term of the loan via a first charge
A commercial rate of interest must be paid and capital and interest must be repaid at least annually
50% of the value of the scheme can be lent to the company and the loan must be made for genuine reasons of assisting the trade of the borrower
The repayment period of the loan must not be longer than 5 years from the date the loan was made
SSASs are also permitted to purchase commercial property, which is another option for raising funds should your business own its own premises. Your SSAS can purchase the property from the business and a commercial Lease is created for the business to pay open market rent to the pension scheme. Selling your business property to the SSAS provides a cash injection for the business and a tax free investment stream into your SSAS.
SSASs are tax-exempt so contributions are tax relievable and investments are free of capital gains tax. At retirement age, the SSAS can pay retirement benefits to members under flexi-access drawdown, this gives the scheme members maximum flexibility when taking their tax free cash entitlement and pension income.
If you would like to know more about SSAS pensions and how they may benefit you and your business please feel free to contact our office and one of our pension specialists would be more than happy to arrange a free initial consultation. You can contact us by telephone on 02476 388 911 or by email to [email protected].