Investing in Property with a Family Pension Plan

Family investment
Getting started

Setting up a Family SSAS pension and investing in property is surprisingly straightforward. For company directors it is an attractive alternative to traditional pension schemes for many reasons, not least the longer-term benefits it has for families.

The unique flexibility of the SSAS pension enables investment at your discretion within set rules, whilst retaining the tax advantages of a pension. The SSAS is its own legal entity and a pension trust, so afforded enviable tax benefits, both as you invest and grow your pension and when it comes to inheritance.

How this works for families

As a company director, you can set up a Family SSAS Pension and invite up to 11 family members and/or close business partners to be part of the SSAS. All of the individuals become trustees of the pension.

A SSAS pension is an extremely tax efficient trust that can be handed down through the generations, securing your family wealth and growing the pot, whilst still enabling you to take an income in retirement. When you are no longer around, expensive legal fees and administration costs are avoided as the SSAS pension is already owned by the family. Benefits can be passed down, which is where traditional pensions fail.  Assets can be transferred to beneficiaries easily, quickly and all within the pension’s tax efficient wrapper as they do not form part of the estate, but are pension owned. There is also privileged flexibility within the SSAS that allows beneficiaries to receive their benefits as drawdown or asset-based awards.

Investments your SSAS chooses to make, using its funds are, uniquely, at your discretion as members. If investments comply with HMRC regulations, then the SSAS can invest and because it is managed by the company director and family, expensive pension fund fees can be avoided.

The Family SSAS
The Family SSAS Pension wrapper protects the business & assets, reduces tax liability, funds retirement and grows for future generations
Investing in property with your Family SSAS Pension

A popular SSAS investment choice is property. Property has many attractions for investment by the Family SSAS, including security against bricks and mortar, steady and consistent returns and it is a tangible investment with relatively low volatility, in contrast to the equity markets. Property held within the SSAS is ring-fenced from creditors and does not form part of the estate, securing it for future generations and keeping it extremely tax efficient.

HMRC regulations state that a SSAS can only invest in or hold commercial property. It cannot invest ‘directly’ in, or hold, residential property. But don’t despair, there are plenty of ways you can invest ‘indirectly’ in residential property, using your SSAS. Examples include property loans, bonds, crowdfunding and loans to third party property developers, to name a few. These alternative forms of property investment can all generate growth for the family SSAS and have relatively low time management needs.

You might also choose to transfer existing property assets into the Family SSAS as pension contributions, protecting them from creditors and affording you favourable tax benefits.

Furthermore, you might decide to buy your business premises with your SSAS. Doing so entrusts the property to the SSAS. The property is likely to gain in value, but if sold, the SSAS as a pension does not pay capital gains tax on the profit. The asset is owned by the SSAS, but as your family are all members of the SSAS, the asset is essentially still owned by the family. Rent you pay for the premises is classed as a business expense, so your company is afforded corporation tax benefits on payments to the SSAS and the rent the SSAS receives, not liable for income tax, all growing the pot. A win, win for the SSAS and for your family.

Your SSAS could elect to invest in property loans or bonds. These are loans to property companies that earn the SSAS a fixed rate return over a set period, with this loan being repaid to your SSAS in full at the end of the investment term. Similarly, your SSAS could invest in property crowdfunding. Or perhaps you might want to make a third-party loan to a property developer, via your SSAS. The benefits of the investments mentioned in this paragraph are that they allow indirect access to residential property investment, which is then allowed under HMRC rules. This has the added advantage of affording hands-off investments for inexperienced property investors, with smaller pots or without the required time commitment for direct & individual property investments.

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