people
Making the
of pensions
Pension schemes may not always be the top of anyone’s agendas – however, what is often overlooked is the ability to use the additional flexibilities of certain pension schemes to dovetail with business requirements, all whilst allowing the business owner to benefit from the main purpose of a pension scheme and save for their retirement at the same time. In this article I will explore some of these flexibilities.
Not all pensions are created equal. Like many things, different pensions offer different flexibilities – ultimately the need for these depends on a person’s objectives. Certain pensions, known as Self Invested Personal Pensions (SIPP) and Small Self-Administered Schemes (SSAS) offer the highest level of flexibility in UK pension legislation, including the ability to lend money back to connected companies, purchase commercial property and even invest in connected company shares. Lending This flexibility is specific to a SSAS, given this pension scheme is established by a
company, and therefore has the flexibility of lending up to 50% of its net value back to the employer.
There are wider conditions to bear in mind including: - Interest rate should be commercial but must be at least 1% above the average base rate for the 6 leading high street banks. - At least equal annual repayments of capital and interest. - Security by way of first legal charge on an asset(s) of equivalent value to the loan plus interest. - Term of no more than 5 years, although can be rolled over once. If all the above can be met, this can be an excellent way of creating an investment strategy for the scheme whilst also assisting a business with a particular project or cash flow need for instance. There is the added benefit in that the interest is typically a
