A comprehensive guide to Pensions and Investments for Investing in Property
SSAS Pension Loans
A guide to SSAS Pension scheme Loans
One of the attractive benefits of a Small Self-Administered Scheme pension is the ability to make 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 loan within a SSAS pension
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 loan to 3rd party
A loan 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 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
What our clients say
Recently been working with Tom at the Landlords Pension through a recommendation from a close friend. Tom is very knowledgeable and explained their services very clearly. Really helpful and friendly guy who immediately put me at ease. Always at the end of the phone or email ready to answer any questions I have.
Highly recommend The Landlords Pension for setting up a SSAS pension. Many Thanks to Liam, Michelle, Teresa and the team for their support throughout and making it an easy process. Looking forward to our working relationship with future investments.
Wouldn’t hesitate to recommend there services to open a SASS, massive thanks to Dan, Michelle and Teresa who made the setup seamless, very supportive throughout the whole process.
Look forward to many years of successful investments with The Landlords Pension
Highly recommend The Landlord’s Pension for opening a SSAS. They are highly professional yet friendly and personable. They are really helpful and keep you informed every step of the way. It’s refreshing to pay for a service by a company who actually do what they say they are going to, with zero aggravation and problems! Thank you guys 🙂
I recently opened my SSAS through The Landlord’s Pension and they have been professional, approachable and efficient throughout. Simon, Teresa and Michelle have all been great in answering my questions and queries and doing their best to ensure the process of transferring over my existing pension has been a smooth and seamless one. I would have no hesitation in recommending them.
I’ve been working with The Landlord’s Pension this year to sort out historically messy pension arrangements and take control by creating a Family SSAS. Chris Brown has been an absolute pleasure to deal with, friendly professional advice all the way through. Thanks!
We had a number of workplace and final salary pensions, dotted all over the place and decided to pull them all into one SSAS. Laura and the team were excellent in explaining what to expect and keeping us advised every step of the way, in fact as part of the fact-find, we came across pensions we didn’t realise we had! I manage my own SSAS, but I know that Laura is at the end of the phone if I need her and she will not hesitate to help. I couldn’t recommend The Landlord’s Pension enough, they were absolutely brilliant!