SSAS Pension Practiioner - A business loan from a SSAS

A SSAS is the only type of pension scheme that allows you to make a loan directly to your business using funds held in your pension scheme. With a SSAS you as trustee of your scheme set the terms of the loan and your business repays the capital and interest to your SSAS pension scheme. The interest benefits you and accrues in a tax exempt environment.

	How much can I lend to my business? You can loan up to half the value of the SSAS fund to your business. If you (subject to obtaining financial advice) transfer in pensions from other schemes, then those funds can also be included in any loan to your business from a SSAS. Protected rights must be excluded in assessing lending levels.

	How do I protect my SSAS from a loan default? SSAS loans to your business must have security. This importantly safeguards your SSAS pension scheme from a loan default by your business. The loan can be secured as a priority charge on any asset owned by the company, you or a third party. The nature of the asset is similarly flexible; it can include book debts of the business, residential property and shares owned by you in the business. It is important that the security is equal to the amount of the loan, this will also help ensure that your SSAS is not worse off if the business cannot meet it’s obligations.

	Is there a right time to make a loan? If your business pays corporation tax, then a contribution to a SSAS pension scheme just prior to your year-end can qualify as a tax deductible business expense. Half of those funds can then be made available to the business as a scheme loan, this money may be used for any purpose, including cash flow. This will allow the company access to cash, whilst reducing the company’s tax bill.

	How does the cash get paid to my business? A SSAS pension scheme bank account is opened to receive funds. (You will be the only signatories to this). We will assist with providing you with the correct documentation for the loan and security if you wish. Once the paperwork is completed, you will either draw a cheque or transfer the loan amount from the SSAS pension scheme to your bank.

	What interest rate terms apply The rate of interest must be at a commercial rate (subject to a minimum of approximately 1% above the average of bank clearing rates) and the term of the loan must be no more than 5 years. If the company gets into genuine repayment difficulties, the loan can be rolled over once for a further 5 years. There must be equal repayments of capital and interest on the loan. For example, a SSAS loan can be repaid by capital and interest payable annually in arrears.