Of course, there are more than 5 ways that a Property SSAS Pension, technically known as a Small Self-Administered Scheme (SSAS) can help you make money, but to simplify, here are the 5 key elements:
- Increased returns by investing in property using a pension
Returns upon investments can be controlled to suit your strategy and goals. Returns that are paid to the pension fund are exempt from income tax.
- Combining and reducing fees
Just one set of fees, and all fees can all be paid by the SSAS property pension.
- Exceptional tax efficiency
Investments are made by the pension and assets are held within a pension, affording extremely favourable tax advantages.
- The ability to grow your business
A SSAS can make loans of up to 50% of the fund’s value to your limited company. So you could pay profits in and take them back out as a loan, affording you increased tax relief.
- Capital gains benefits
Assets, (such as property), can be held within the SSAS. If they are sold, profits are not liable for Capital Gains tax.
So, let’s drill down a bit into what this means for you and how to achieve them:
Purchase land or commercial property
A fantastic privilege of a SSAS property pension is that it can purchase, own and develop land and/or commercial property. This brings extensive tax advantages, including:
- Tax relief on any contributions paid into the SSAS, towards the land or property purchase
- Rent paid by the your company if you are the tenant can be treated as a business expense, reducing income and corporation tax for your company.
- Gains in value of the property are free from Capital Gains Tax within the SSAS property pension.
As a pension, the SSAS can only purchase commercial property. This can be freehold or leasehold property. Examples of the type of property classed by HMRC as commercial include offices, industrial units, warehouses and business units, shops, garages and car parks, agricultural land, land marked for development, forests, nursing homes, hotel buildings, pubs etc..
How about using your SSAS to develop some land? It is within HMRC regulations if the development is non-residential or has not reached the point of being habitable. To put that simply, you could buy land, apply for residential planning and develop the land. Prior to any building becoming habitable, simply sell the development, avoiding owning the development with any residential element on site and bank the gains in your pension tax free.
Sell and lease back your business premises
Use your SSAS to inject cash into your business by purchasing your business premises and leasing them back to your company. (Under HMRC rules, a SSAS can purchase commercial property, including property that you own, up to the value of 50% of the fund).
So, let’s look at what you gain by taking this route:
- Cash is injected back into your business
- Additional funds your business has had to pay into the SSAS to help facilitate the purchase qualify for tax relief
- Costs and fees incurred by the purchase are payable by the SSAS
- The property, as part of a pension, is protected from creditors
- Growth in the value of the property is free of Capital Gains Tax
- The pension is receiving the rent, but does not pay income tax on this gain
- The rent that your company is paying to the SSAS is an allowable business expense against the company’s corporation tax bill.
As you can see, when you combine tax relief on contributions, tax free growth in the pension fund, the rental payments being tax deductible and received by the pension without liability to tax, the power of the SSAS to make you money and protect your assets is a very powerful one.
Generating returns from residential property
The direct purchase of residential property may not be permitted within any pension but with a SSAS property pension there are options such as property bonds, crowdfunding, property investments by an unconnected 3rd party with a SSAS loan etc., all of which could allow your SSAS to generate returns from residential property.
Transfer your assets to the SSAS for tax free gains and protection from creditors.
This means you can transfer an asset, owned by yourself, the business or a member of the SSAS, into the ownership of the SSAS. For example, commercial property, quoted stock and shares, intellectual property, insured funds etc., can be transferred to the fund. This avoids sale costs and the cost of reinvestment under the SSAS. An asset held in a SSAS property pension is protected from creditors in the event of your business becoming insolvent.
All directors can pool former private or employer pensions
Unlike personal pension schemes, a property SSAS pension can combine the funds of up to 12 directors, senior executives or family members. With just one pooled pension, you are only subject to one set of fees; yet another massive benefit of the SSAS. It also significantly enhances buying power. Moreover, a SSAS property pension can borrow 50% of the combined value of all director pensions as a mortgage further enhancing your buying and investing position.
This is just a brief explanation of what makes the property SSAS pension the best pension for company directors and how the unique flexibility of a SSAS can help you make money. Always seek expert advice. The Landlord’s Pension are experienced in pensions and property investment. Transferring your existing and frozen workplace pensions to a SSAS could be your ideal avenue for making your money work harder this year.