Can I have a SSAS?
A SSAS can be established by any employer – including limited companies, partnerships and even sole traders. As long as you have a trading business and at least one employee, then you can have a SSAS. Importantly, however, the membership is not restricted to employees of the business – typically the scheme membership will include the Directors and Partners of the sponsoring business, but can also be extended to include other family members.
Can I use my pension fund to buy property?
Yes, a SSAS can be used to acquire commercial property or land – including agricultural land or land that has been zoned for residential development. Residential property is not permitted (at least not without incurring penal tax charges) but residential land is possible – as long as it does not contain any building which is suitable for use as a dwelling. If you are going to invest in commercial property or land, a pension fund may be the most tax efficient method of holding these assets – as all income and gains are sheltered from tax. The funding for a commercial property or land purchase can be provided in a number of different ways – either by contributions from the sponsoring company or the scheme members, or by liquidating existing pension assets and transferring them into the SSAS. It is also possible for the pension fund to gear up, up to a maximum of 50% of the value of the net scheme assets, in order to finance a property project.
Can I buy my own business premises?
Yes, the pension fund can buy property or land assets from any party, as long as it can be demonstrated that the transaction is carried out on commercial, arms-length terms. Therefore, if you own your business premises personally, or within a partnership/company, then it would be possible to sell the property to the SSAS after obtaining an independent valuation confirming the current market value. This would release the cash held in the pension fund out into your own hands, or into your business. The property would then be leased back to your business, again on arms-length terms – whereby a lease would be put in place between the two parties and a rental valuation obtained to support the terms of the lease.
All rent paid into the pension fund going forward would then be received tax-free by the SSAS, while the business would get a tax deduction on the rent it pays to the scheme (as a business expense). Furthermore, any future increase in the value of the property would be sheltered from Capital Gains Tax, whilst it is owned by the pension fund. Similarly, it would also be possible to sell the property back out of the SSAS at some point in the future, if/when required – subject only to obtaining an independent valuation, if selling to a connected party. Have a look at our own story to see how a SSAS enabled us to acquire our own business premises.
Can I buy investment property?
Yes, commercial property and land assets can be acquired for investment purposes also – and unlike many other SSAS providers, we do not force you to have a tenant for the property from the point of purchase. Although in many cases you will want to secure a tenant, it is not a mandatory requirement; therefore commercial property and land can be purchased for investment purposes only. In fact, many clients have recently been using their schemes to acquire residential development sites, with a view to holding the land for a period of time before selling on (hopefully at a profit) – but no rental income is anticipated in the meantime.
Can I lend money to my own business?
Yes, unlike any other pension vehicle, a SSAS has the facility to grant loans to the sponsoring employer of the scheme, where the employer is a limited company (the loanback option is not available to partnerships or sole traders). Loans to the pension fund members and/or other connected parties are not permitted, but loans to the sponsoring company are possible, subject to satisfying the related HMRC conditions in advance (including the need to provide first charge security to the pension fund Trustees). Please get in touch for further information on how this could work for you.
Can I lend money to another business/person?
Yes, loans can also be granted to unconnected third parties, whether that be another business or an individual. It is important that the borrower in this case is not connected to the pension fund (or any of its members) in any way, otherwise the loan will result in penal tax charges – of up to 70%! This option has become more popular however, in recent years, as clients seek to make their cash assets work harder during times of poor deposit interest rates – with some pension funds granting loans to third party property developers, for example, in return for a premium rate of interest.
What else can I invest in?
In addition to direct investment in commercial property and land, and loans to the sponsoring company and/or third parties, the pension fund can also invest in a range of other assets – including stocks, shares, investment trusts, collective investment schemes (including unregulated collectives), unit trusts, open ended investment companies (OEICs), gold bullion, insurance policies, currency, gilts and bonds. Shares in unquoted companies are also permissible in certain limited circumstances. Investments into intellectual property are also becoming more popular recently, with more and more businesses recognising the value (and indeed being able to place a monetary value on) this element of their intangible assets. Find out more about what a SSAS can do here.
Can other family members join my SSAS?
Yes, although the scheme membership should include employees (or Directors) of the sponsoring business, it can also be extended to non-employees – including other family members who are not involved in the business. In this way, the SSAS can become hugely useful in terms of succession planning as it enables assets to be passed onto the next generation, free from Inheritance Tax – and, as a result, many of our schemes are now second (and in some cases third) generation family schemes!
How do I get the money out?
Benefits can be drawn from the scheme at any stage from age 55 (or age 57 for those born after 6th April 1973) with up to 25% of your fund payable tax-free. The remainder can then be drawn as pension income, without restriction, subject to your marginal rate of income tax. Many clients will vary their pension income on an annual basis to ensure they remain within the basic rate tax band (taking account of their other sources of income) while others will match their income to the rental income of their property asset(s). With the increased flexibility and freedoms now available around how you extract your pension income, the choice is yours!
What does it cost?
Each scheme is costed on an individual basis, depending on the amount of work involved in each case. The costs are broken down into 3 distinct elements:- firstly there is an initial cost to have the scheme established and registered with HMRC and thereafter an annual administration charge applies which covers all of the ongoing scheme compliance (including all of the various returns due to HMRC and the Pensions Regulator). Within the annual administration fee, we also include an annual meeting with the Trustee/members, which we believe is very important for all parties as it effectively forces the Trustees to focus on the scheme at least annually – to ensure you are maximising the benefits of your scheme.
Outside of this, transactional charges will apply where the Trustees want to be involved in specific one-off projects – such as a property or land purchase, for example, or arranging a loan to the sponsoring company or third party. We will always endeavour to agree any additional fees in advance, based on the complexity of the particular assignment. However, we would not expect the associated costs to be a material drag on the scheme, especially when viewed in light of the significant tax advantages.