As many people with existing and frozen pensions look to the flexibility and control offered by Small Self Administered Scheme (SSAS) pensions, the question arises “What exactly can one invest in through a SSAS pension?”
At The Landlords Pension we deal with a vast number of SSAS providers and each have their own specific criteria around what type of investments are and are not permitted.
This demonstrates the importance of an in depth discussion with regard to an individuals plans prior to choosing the most suitable SSAS provider for their needs.
There are a number of different strategies when looking to invest a pension in property.
Property bonds are a hands off investment in which the member may enter into a loan agreement with a developer offering a fixed return over a fixed term with the pension fund trust securing a 1st legal charge over a property or properties. The terms and returns of these bonds generally ranges from 1 to 5 years with a return of between 6% and 12% per annum.
Land and Commercial Property:
A SSAS can directly purchase land and commercial property within the fund, however holding residential property within the fund is not permitted. It should be noted that the definition of commercial and residential property within a pension is defined by HMRC and not whether the property is subject to commercial lending or a member or any other institution defines the property as commercial.
As an example HMO’s, serviced accommodation and holiday lets, which some may class as commercial property, with commercial lending are not classed as such by HMRC.
As many property investors incorporate their businesses another option with a SSAS pension is a loan back from the pension fund to the members limited company. The company could use these funds to purchase residential property, use as deposits or for refurbishment costs as long as the loan rules set out by HMRC are adhered to.
Other Investment Options
Many people move their pension funds from Self Invested Personal Pension (SIPP) schemes as well as company and personal pensions purely to invest in property in one way shape or form, however due to the aforementioned flexibility and control of a SSAS pension scheme members benefit from the ability to choose from a number of different investment options, some of which could otherwise be closed to them from their current providers. It is of course possible to combine invest in property, take a loan and invest in any of the other areas permitted under pension rules.
What are the alternatives?
Equities – The typical stocks and shares in most standard pension funds
Government Gilts- Fixed interest securities usually offering a low fixed return
Corporate Bonds – Fixed interest securities offered by companies usually offering a slightly higher return than Gilts
Foreign Equities – Stocks and shares traded on a recognised overseas stock exchange
Authorised unit trusts – Pooled funds that do not hold residential property
Deposit accounts – Deposit accounts with any authorised financial institution.
Hedge funds – Pooled investments generally made by financial institutions such as insurance companies and banks
Unit Trusts – Equity investment funds generally managed by insurance companies
Gold – Investment Grade gold bullion (subject to conditions)
NS&I – Investments such as premium bonds considered to be a low risk/low return investment
Commercial loans – These could be either secured or unsecured loans to UK limited companies.
This is not an exhaustive list of available investments and some may need a member to evidence that they are a sophisticated investor or high net worth individual, but it does give an indication of the control and flexibility that a SSAS pension holder enjoys.
If you are looking for a way that you can achieve greater control, flexibility and growth from your existing or frozen pension fund, there is an opportunity for you to do so.
If you’d like to find out more about how The Landlords Pension could help you grow your retirement fund call us on 020 3907 8400 to speak with one of our experienced consultants.