The best way businesses can use their SSAS to beat the credit crunch
According to the UK’s No.1 SSAS administrator, Pension Practitioner .Com “businesses can use small self-administered schemes to loan back money to their company, providing much needed funding”.
Regardless of the press pundits optimistic headlines declaring the worst is over, many small and medium sized businesses when asked the question. “Can you obtain funding or roll-over your credit line without a hike in fees or interest?” The in veritable answer is no!
Analysts at Pension Practitioner .Com state that “there is a dislocation appearing between the apparent positive economic outlook and the reality of the high street.”
Pension Practitioner .Com reported a marked increase in SSAS administration business this quarter, especially for first time inquiries. There are other options in the market, but information provided by financial advisors indicates a tide shift towards SSAS to provide the cash and credit, that the business person needs to keep trading, but at the same time gives a healthy rate of return to the pension scheme.
There are a number of reasons for this trend:
Members are the directors and key employees of the sponsoring employer, and therefore are often the first to identify market changes to their business.
A SSAS has the same rule for contributions and benefits as an insured company arrangement, but as they are investing the assets of the scheme for themselves as members, it is generally perceived by many financial advisors that SSAS has greater control and flexibility over other types of pension schemes.
The management of Pension Practitioner .Com indicated that this is due to a key benefit of SSAS. It can loan back money and assets to the company. This benefits the company and members of the fund (The same persons.).
How it works is essentially simple. Contributions to the SSAS fund are tax efficient and deductable. The company benefits by relieving it’s exposure to tax and gets a most competitive loan (no less than 1% above the base rate). The SSAS does better as it securely makes a loan gaining better returns than it would make with the bank. The SSAS has first charge on the asset to the value of the loan plus interest, and this need not be a company asset.
Pension Practitioner .Com state up to 50% of the SSAS can be loaned to the sponsoring company, for up to 5 years, for both intellectual and physical property.
Businesses are turning to their SSAS pension funds and away from the banks, to cut expenses and get better financing
In conclusion, the trend speaks for SSAS. Informed businesses with SSAS are voting with their feet.
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