Which Commercial Finane News Archive

Pension loans have hit the headlines in recent weeks as individuals hit by the tough economic climate have been advised to take personal pension loans which have proven to be disadvantageous and in some cases illegal.

Not all Pensions loans are however the personal pension loans that have come under negative regulatory scrutiny. Owner directors have the ability to interact with a Small Self Administered Scheme (SSAS) to make pension loans available on commercial terms to a sponsoring employer or third party.

Owner directors are able to obtain commercial loans through the utilisation of pension loans from one or more directors’ pension schemes. The directors’ pension scheme is able to make a pension loan to a business as long as:

• adequate security available, as any commercial loan would require
• the term does not exceed 60 months
• the business can demonstrate affordability

Pension loans can prove advantageous for owner directors during these tough economic times, complying fully with pension legislation and aiding the growth of the pension fund.

If you would like to discuss the how a directors pension scheme can make a pension loan, please contact us.

A Small Self Administered Scheme (SSAS) is a form of occupational pension which enables member trustees to make their own investment decisions within HMRC guidelines. Some of the investment choices available to a small self administered scheme member trustee are investments that many would not normally associate with a pension.

A small self administered scheme enables owner directors, as individuals or a group, to choose from a number of self investment options including secured commercial loans to a sponsoring employer, a commercial property purchase and an intellectual property purchase.

The small self administered scheme also provides long term flexibility of investment. Owner directors may choose various self investment strategies over time to maximise the self investment opportunities within the scheme, facilitating long term interaction with their businesses. This may result in the small self administered scheme providing multiple loans and asset purchases as scheme investments, as an alternative to solely investing in traditional investments.

The ultimate aim of a small self administered scheme is to provide income in retirement for the member trustees. Throughout the initial pension savings period which benefits from tax efficiency on contributions and investments, the member trustees also have the opportunity to interact with their businesses via the self investment options available to them under scheme rules.

If you would like more information or advice on how a small self administered scheme can work for you, please contact us.

SSAS Pensions are an effective mechanism for business owners to tax efficiently invest for their retirement. A major advantage of SSAS pensions for business owners is the SSAS pensions ability to interact with their business interests. Whilst SSAS pensions providing business funding is nothing new, it has historically been in a niche market. The current business banking climate has made the benefits of utilising SSAS pensions more attractive to business owners as a SSAS pensions investment options can reduce a business’s reliance upon the banks.

Business owners with SSAS pensions will be aware of the two main business interactions SSAS pensions can provide, the purchase of commercial property and the ability to loan funds to a business. However, SSAS pensions rules extend to enable SSAS pensions trustees to invest in intangible assets. Intangible assets include intellectual property which the majority of business will own, but may not have previously valued. SSAS pensions can allow investment in intellectual property such as trademarks, domain names, copyrights and patents.

The benefit of SSAS pensions utilising intellectual property as an investment mechanism is that the investment structure is different from that of a SSAS pensions loan. The intellectual property is owned by the scheme and for the right company; this can offer significant tax planning opportunities, whilst providing a vital injection of working capital.

For advice and information, please contact us.

The SSAS pension has long been established as a mechanism for company directors to invest pension assets within a business, whilst actively saving for retirement. With the right advice, a SSAS pension can provide continual business funding options and become an integral part of a business’s financial planning.

The main investment options afforded to the SSAS pension by HMRC that benefit sponsoring employers, are its ability to provide loans to the sponsoring employer, purchase intellectual property and purchase commercial property. Planned correctly, a mix of these investments will enable members to maximise the effectiveness the SSAS pension has within their business and maintain the SSAS pension’s interaction with their business over the long term. This may result in a reduction in the reliance upon 3rd party business funding.

The investment scope of the SSAS pension ensures that it is a powerful mechanism to meet current business funding needs and objectives, whilst actively investing for the scheme members retirement. With strategic planning, a SSAS pension can provide members with strong asset diversification, both commercially and personally, to provide greater flexibility in retirement options. A SSAS pension can provide both business investment interaction and retirement benefits simultaneously with the correct planning in place.

If you would like to discuss if a SSAS pension is suitable for your business, or, if you have an existing SSAS pension, please contact us.

Many business owners are turning their attention to their sometimes unappreciated Small Self Administered Schemes (SSAS) in light of the banks unwillingness to make working capital facilities available to business. The ability of the SSAS to lend to a sponsoring employer at commercial rates has provided a lifeline to many business owners whose bank will not entertain further lending in the current climate.

Lending statistics clearly illustrate a change in lending culture since the start of the economic crisis. British Banking Association figures show a decline in total business funding through business loans. In June 2008, average monthly business loan new lending was £991m to business; in 2009 this fell to £833m. In June 2010 this figure stood at £564m.

The situation has led owner directors into increased self funding to protect their businesses. Where available, savings, credit cards and personal loans provide a relatively quick and simple injection of working capital in the form of directors’ loans. Directors’ loan accounts are rarely afforded creditor protection within the business, increasing the exposure of directors personally and family assets.

A SSAS is an HMRC approved pension scheme able to provide a long term business funding mechanism to sponsoring employers. It has the potential to replace 3rd party funding facilities, tax plan via pension legislation and take active control of retirement planning.

SSAS rules allow the member trustees to make a number of business interaction decisions. The rules applying to SSAS loans allow:

- 50% of net SSAS scheme assets to be made available as a SSAS loan.
- SSAS loan interest can be discretionary, subject to specific HMRC guidelines
- SSAS loans have a maximum term of 60 months
- SSAS loans must be protected by security equal to the value of the capital plus interest.

Owner directors mobilising their existing pension assets via a SSAS loan are able to provide working capital with a degree of certainty. As an ongoing business funding mechanism, a SSAS can be maintained as a business funding mechanism even in retirement, providing SSAS loans, commercial and intellectual property ownership.

Key to the successful implementation and maintenance of a SSAS as a business funding mechanism is the associated business funding advice and SSAS trustee administration. For advice, please contact us.