Directors deploying pensionsto support their businessBank Lending Freeze The Advantages of SSAS LoanbackIn last year’s autumn statement the chancellor The loan interest, which is an allowable businessannounced his intention to expand credit lending expense for tax purposes, is paid back into their ownfacilities for small businesses and this was confirmed pension rather than to a bank. They could alsowith the launch of the £20 billion National Loan choose to set a higher rate to give a better return onGuarantee Scheme, aimed at small-to-medium-sized their investment.businesses with a turnover of less than £50 million. There must be a first charge over an asset which isJohn Cridland CBI Director-General said: “Our report equal in value to the loan, plus interest, at the time ofon future business champions said that, to achieve an advancement. The loanback is only available for theextra £20 billion in growth potential by 2020, medium- company of director-owned businesses.sized firms must have access to new kinds of finance.This report confirms the scale of the challenge, and Although an attraction of SSAS is that it can make asets out practical steps needed to help these loanback to the sponsoring employer it must satisfycompanies grow and create jobs. the 5 key tests that must be met for the loan to be classed as an authorised payment. These tests relateHowever in 2012, there appears to be little appetite to the following; security, interest rates, term of loan,from the banks to take any further risk at this time, maximum amount of loan & repayment terms.without very high levels of security, up frontadministration charges and interest rates that far How about Protected Rights benefits?exceed the Bank of England’s standpoint at this time. Up until recently the inability to hold Protected RightsPension Loanback Facility has proved a stumbling block, as any benefits have needed to be held separately outside of the SSAS.Business clients, whose banks are unwilling to lend,could borrow from their own pension pot by converting The removal of Protected Rights benefits from thistheir existing personal pensions or SIPP’s into a SSAS. tax year will allow business owners to transfer funds into their SSAS pensions in order to increase funds to • A SSAS can lend up to of 50% of its net assets, improve the borrowing capabilities for property with interest rates of 1.5% and a maximum term of purchase as well as loanbacks for capital purchase. up to 5 years. Where SSAS owners have already taken advantage • A key feature of SSAS is the ability to combine of the opportunity to borrow against property assets, multiple individual pension pots into one scheme. the new funds can be used to repay or reduce the existing borrowing. The SSAS can then pay lessConsider a situation where four company directors interest to a bank with rental income accruing withineach have their own pension worth £500,000. If instead the SSAS, again creating the opportunity for furtherthey had a SSAS, under which they are all members investment and advice.and trustees, having a total value of £2m, they couldmake available a £1m loan to their company.
Chartwell & Lindley Trustees, part of‘The Lindley Group’Lindley TrusteesLindley Trustees Limited, have operated small self-administered pension schemes (SSAS) for over 30years.Lindley’s was one of the first Inland Revenue approvedprofessional trustees and is able to offer a full self-administered service, including the purchase ofcommercial property, shares, and loans for commercialpurposes.We also offer our own SIPP (Self Invested PersonalPension) for those individuals where a SSAS may notbe appropriate but still require bespoke retirementplanning.By working in partnership, Chartwell FinancialServices and Lindley Trustees are able tooffer a unique service to clients, unrivalled inthe financial services sector.If you have any questions about anything Important noteyou have read, please contact The information in this bulletin is based on our understanding of tax law and practice at the date of publication, which may be affected by future changes and individual circumstances. It isJon Fisher/Richard Clarke issued as general information and is not intended to be advice toChartwell Financial Services Limited any specific person named or otherwise.Lindley Court If the information refers to a specific product, it may be based onScott Drive the contents issued by the provider.AltrinchamWA15 8AB Before taking or refraining from any action regarding the contents of this publication you are recommended to seek professional advice. The Financial services Authority (FSA) does not regulateT 0161 929 3500 tax advice therefore tax advice is outside of the protection rulesE firstname.lastname@example.org of the Financial Services and Markets Act & the FinancialW www.chartwellfs.com Services Compensation Chartwell Financial Services Limited is authorised and regulated by the Financial Services Authority. Registration number 189602.