Self investments

Property

A SSAS allows members to have greater control over how their pension funds are invested. One investment option available to SSAS members is the purchase of a commercial property.

To purchase a property within a SSAS, the following steps need to be taken:

1. The SSAS trustees need to decide on purchasing a property and liaise with their Professional Trustee – completing a property purchase questionnaire to begin the process.
2. The SSAS trustees, together with the Professional Trustee, need to appoint a solicitor to undertake the conveyancing for the pension scheme.
3. The property is purchased using funds from the SSAS, and/or borrowing as required.
4. The property is then leased to a tenant, generating rental income that is paid back into the SSAS.

It is important to note that there are various rules and nuances around purchasing a property within a SSAS, and it is recommended that your professional Trustee is consulted at the earliest opportunity. We’re very happy to discuss potential purchases with clients, as we often find the sooner we’re involved, the smoother (and less costly) the overall process is.

Loans

Another reason that company Directors use SSAS pension schemes as an alternative to more ‘standard’ pension products, is the ability to utilise a loanback function – Here is a summary of taking a loan from a SSAS:

1. Eligibility: Speak with your SSAS Trustee around your proposal first, and whether the scheme can lend.
2. Loan amount: The maximum amount that can be borrowed is 50% of the value of the scheme’s NET assets.
3. Repayment: Loans must be repaid, with interest, within five years, and must be secured on a first charge basis.
4. Interest rate: The interest rate charged on the loan must be no less than the market rate for a commercial loan.
5. Tax implications: If the loan is not repaid on time, it will be considered a reportable event, and may result in tax charges and penalties being levied upon the scheme by HMRC.
6. Loan purpose: Loans from a SSAS can be used for a wide range of purposes, including investing in property, making investments, purchasing assets or providing working capital for a business. A loan cannot be made to a business in order to sustain it however, and we will require copies of accounts for the borrower, as well as a letter of comfort from the borrower’s accountant, demonstrating the ability to make repayments.

Finally, It is important to seek professional advice before taking a loan from a SSAS as it can have significant tax implications and may not be suitable for everyone.

Purchase of unlisted shares

Another of the investment options within a SSAS is the purchase of unlisted shares, which are shares in a company that are not listed on a stock exchange.

To purchase unlisted shares within a SSAS, the scheme trustees will need to identify a suitable company in which to invest. They will need to carry out detailed due diligence on the company’s financial position, management, and growth prospects before making a decision to invest.

Once the trustees have identified a suitable company, they will need to negotiate the terms of the investment and agree on a price for the shares. This will typically involve seeking advice from an independent professional adviser.

The SSAS will then use its assets to purchase the shares in the company, which will be held as part of the scheme’s investment portfolio. The SSAS will receive dividends on the shares, which will be reinvested or used to purchase additional shares in the company.

It’s important to note that when purchasing unlisted shares, there are limits to both the maximum percentage of the pension scheme funds that can be utilised for this purpose, as well as a maximum percentage of a company’s shares that a SSAS can buy. At the same time investment in unlisted shares carries risks, as the value of the shares may go up or down.

With any scheme investment, The trustees of the SSAS have a duty to act in the best interests of the scheme members, and to ensure that any investments made are suitable and appropriate for the scheme’s objectives.