In these difficult times many business owners are looking at ways to support themselves and their businesses, with many making use of Government grants, loans and the option to furlough staff.

There could be an additional source of assistance, which can be prudent at the best of times, and that is making good use of accrued pension funds.

In the next few paragraphs we will take a brief look at two options which could be useful;

Property purchase

If a business runs from a property which it owns, it could choose to sell the property to a SIPP (Self Invested Personal Pension) or SSAS (Small Self Administered Scheme) which would release funds back to the company.

Equally, if the business owner holds the property personally, they could also consider selling it to their pension to release funds back to themselves.

Of course you would have to have sufficient funds in the pension scheme to make the purchase, although it is also possible to borrow up to 50% of the pension fund value to help toward this.

Lots of different types of commercial property can be held in a pension, such as offices, warehouses, shops and land, provided they meet the required criteria.

There are of course a number of factors to consider before venturing down this path, such as the business having to pay a proper market rent to the pension fund for use of the property, how it fits with the pension holder’s wider plans and of course the costs.

Loans back to the employer

An additional option open to a SSAS is to make loans back to the sponsoring employer, which could be up to 50% of the fund value, provided it is for a commercial purpose and a number of additional criteria are met.

For example, the loan would need to be “at arms length”, so normal commercial rates of interest would need to be charged, have a maximum term of 5 years and it would also need to be secured against an asset of equal value.

There are rules on what the money can be spent on too (and failing to comply can result in tax penalties) and of course, if money is loaned from the pension fund there is a risk that it will not be paid back, to the detriment of the pension holders.

Due to the complexities of the rules and the potential impact on the pension fund, the above options are something which require careful consideration and advice prior to proceeding.

Should you wish to find out more about how pensions could be used in conjunction with the business requirements, then please get in touch.

Lee Smythe MSc