Can I borrow from my Pension to Help my Business?

by | May 6, 2020


(A Review of SSAS & SIPP lending)

COVID-19 has changed everything – There are thousands of business owners facing enormous financial pressure.

On the one hand they know that the Government have offered a range of ‘loan’ schemes designed to help and support them and on the other hand they see Banks and other Lenders asking for high interest rates. They are being bombarded with emails and adverts for loans and ‘solutions’ to their problems.

One area that might be missed – is that of PENSIONS.

Having spent years building up a significant nest egg, many business owners are unaware of the fact that their own money could be used to help and support their business.

With other investments being volatile, and property prices stagnating – why not pay yourself interest and have your pension benefit from this current situation?

HMRC allows a company to take loans from a pension. Most often this will be from an arrangement called a SSAS (Small Self Administered Pension Scheme).

There are limits on how much can be loaned to your business – normally this is 50% of the size of the pension fund.

So if you had a pension worth £500,000 – there is an immediate £250,000 available that can be loaned into your business, with interest paid back to your own pension. No more high interest being lost to some Banker!

Many business owners are unaware of the rules or how they can use their pensions – which is where we can help.

Paul Stewart (Our MD) is a Pensions Administrator (an official HMRC recognised role). He was also an Examiner for the Chartered Insurance Institute dealing with the exams IFA’s had to pass in order to give advice on …PENSIONS! So if there is anyone who can help guide you, then he can!

The rules within a SSAS on lending, borrowing and how funds are accessed are complex – especially if you already have a SSAS with a property investment within it.

There are however a number of specialist planning tools that can make a massive difference to the SSAS and what it can (and cannot) do:

For example, you may have a property within the SSAS which has a mortgage. Your ‘Advisors’ have told you that the SSAS cannot borrow any more money against the property as the 50% limit has been reached.

By carefully restructuring your SSAS investments, it is possible for the property to be moved into another tax exempt type of unit trust – where this “50%” lending limit is no longer applicable. The SSAS now owns ‘units’ and these can generate income for the SSAS based on the profits that the property is making, so there is nothing lost or sent outside of the business owners control. This unit trust is not one owned and run by a large insurance company, it is one that is specifically established for the SSAS.

If additional funds can be raised against a property, then the SSAS can have cash that can now be loaned to your business!

Alternatively you may have a Self Invested Personal Pension (SIPP) and want to use the money in that – which cannot be done unless you transfer the SIPP into your own SSAS. Again, we can help with that too.

The official HMRC Pensions Rule Book also contains sections that allow for commercial transactions between the pension and its Members. If you have a SSAS, you (by Law) must be both a MEMBER and a TRUSTEE. This means you can often make use of these special clauses in the Law and access funds to help you and your business survive – when all else if failing you.

Obviously a SSAS being a pension allows your business to make contributions to it, and get full tax relief on the contributions.

If your business has made profits in the year before the COVID-19 crisis hit, then making a contribution to a SSAS can be a way to reduce your corporation tax liability. In some cases this will assist the business with cash-flow as the new lower profits will allow the taxes to be paid 9 months after the end of the accounting period, rather than being paid in advance as happens when company profits exceed £1.5m. Once contributed, the SSAS can still loan back money to your business, so helping with cash-flow as well as reducing tax.

The IFAs who give retirement planning advice will normally tell you that contribution limits to a SSAS are restricted to £40,000 or even £10,000 depending upon the scenario.

HOWEVER – there are types of SSAS where these limits are no longer applicable. They use a different calculation, based on earnings. If the numbers stack up properly, we can see contribution limits rise to as much as £200,000… per person!

A SSAS is officially an ‘Unregulated’ arrangement, and as such there are people who are touting them as a place to access ‘amazing but unregulated investments’ which are often scams. We want to stress that we do not offer investment advice and will not tell your SSAS to invest into anything like storage space, forests, offshore projects and all the other areas which are causing clients to lose out.

You as the business owner will be a Member of the SSAS. You will also be a Trustee of the SSAS – without you agreeing and signing to move money, no one else will have access to your pension.

If you decide you want to invest in yourself – then we will be there to show you the best way to achieve that.

If you have a pension (a SIPP or a SSAS) – then there may be a way to use the money to help your business survive. A solution where your business pays YOU – and not some external lender who is wanting to earn a profit from the COVID-19 crisis!    

Most Advisors, such as IFA’s and Accountants do not have the internal experts to assess a client’s FULL situation – and come up with the best overall strategy.

As I have worked in the pensions and tax planning field for over 30 years, I have personal access to experts in all taxes and can combine these experts into a unique service that really does go beyond what you’d get from your normal ‘Advisors’.

Every wealthy entrepreneur or property investor I have ever met had their own Accountant, Solicitor and Financial Advisor – yet in 90% of cases we were able to dramatically able to improve their overall exposure to UK taxes and access to their pension money.

What is vital is the proper implementation – with care at every stage.

This is why we offer a FREE consultation – as it lets us explore your current situation before jumping in with ‘solutions’.

If you are interested in seeing if your pension can be used to help support your business – then call us now, or send us your details and we will call you back. 

We look forward to helping you soon.