SSAS loans - Five conditions for the principal and associated companies
The rules state;
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The maximum loan is 50% of net assets of the scheme at the time of the loan.
- The loan is for a maximum period of five years.
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The interest rate has to be a minimum of 1% over the average of six high-street bank base rates.
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The capital and interest is repayable equally over the period of the loan. The debt payment can be rolled over for one year at no cost.
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The loan must be secured by first charge on an asset of agreed value to the loan plus interest.
The issue of repayment throughout the period of the loan can be overcome. There is no stipulation in the Finance Act to stop a loan from being taken out for one year, repaid with interest at the end of the year and another and another loan immediately taken out. Documenting the loan and ensuring security is in place can be handled by the schemes administrator/practitioner.
In the current economic climate, we constantly hear that on a daily basis companies cannot raise capital. Regardless of Government suppositions, most business persons will tell you that borrowing money is extremely difficult. “The banks are just not lending” to quote one source. This make the possibility of being able to borrow from their pension scheme a significant benefit.
Established companies with excellent track records and adequate security are finding it difficult to impossible to secure lines of credit. Those who gain credit do so at extraordinarily high rates. Base plus 5% to base plus 8% not unheard of.
The Bank of England may drop base rates, but banks are not passing that rate down.
Experts are saying the banking system will never be the same again. Business lending will be more difficult this year than last year. But for those who know, thank goodness for the SSAS.
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