SSAS Pension Loans

How you can use your pension to grow your business, invest in property, or many other investment assets classes using SSAS Pension Loans

A guide to SSAS Pension loans

One of the attractive benefits of a Small Self-Administered Scheme pension is the ability to make SSAS pension loans with your pension fund. But not all loans are the same and it’s important to understand the rules that apply to loans within a pension scheme and how to avoid making costly mistakes. Broadly speaking loans can be categorised into either a “connected loan” or a “3rd party unconnected loan” the rules surrounding these two types of loans are very different.

Connected SSAS pension loans within a SSAS scheme

A connected loan would typically be when a SSAS pension is loaning money back to the sponsoring employer this is also known as a “SSAS loan-back” there are some specific rules set by HMRC on this type of loan.

  • Maximum loan amount plus interest cannot exceed 50% of the value of the pension
  • The loan must be secured by a 1st legal charge over assets at least equal in value to loan plus interest
  • Maximum term of 5 years
  • Repayments of capital and interest must be made in equal annual instalments
  • The interest charged on the loan must be a commercial rate of interest

If you’d like to read the full HMRC rules on a SSAS loan-back, you can do so on their website by clicking here
This type of connected loan within a SSAS pension scheme is the only circumstances where a loan could be made to a connected party. A connected party would be considered another party connected by blood or business which rules out business partners and/or family members

Unconnected SSAS pension loans to 3rd party

SSAS pension loans can be made to an unconnected party within a pension scheme, again there are rules which dictate the type of loan you can make however the rules are not as restrictive as the SSAS loan-back. The loan must be made to a genuinely diverse commercial vehicle (GDVC), it’s important to recognise at this stage you cannot make a personal loan to an individual with your pensions scheme, the loan must be for business purposes. Typically, this type of loan would be made to an established business for genuine business purposes. Any loan made by a SSAS pension scheme must be “prudent” which means loaning 100% of your pension scheme to a new start company without security is unlikely to be permitted.

One of the popular types of loan we see often at The Landlord’s Pension are 3rd party loans to property developers, one of the benefits of loaning money to a business that intends to purchase an asset with the loan is the ability to secure the loan against an asset, similar to how a bank would secure their capital when granting a mortgage.

Who can I speak to for further guidance?

This area of SSAS investment and SSAS pension loans is highly specialised, The Landlord’s Pension have a team of experienced SSAS advisors who understand the structuring of this type of investment. If you’d like to discuss your requirements you can book a FREE initial consultation by clicking here or call us on 01235 426666

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