SSAS Loanback: How to loan funds from your pension to your Limited Company. Illustrated.
How do you loan funds from your SSAS to your sponsoring Limited Company? Let’s take a look.
Loan Security Inside SSAS: What You Need to Know
The loan to the sponsoring employer must not be to boost cash flow or to bail the Company out. It must be to help the Company develop and grow. We are aware that’s a very broad definition. However, if you’re unsure we can speak to you about your specific circumstances and answer any questions you may have.
You must have security for this loan and that security must be on a first charge basis. Nothing else will do. It is also essential that the security offered to the pension scheme is the value of the loan, plus interest and it has to be acceptable to the pension scheme because if the Company defaults on its payments, the security offered will be seized by the pension scheme.
Assets Accepted as Security on a Loan
If you’re considering taking out a loan, here are the assets we accept as security on that loan.
Commercial Property: Classically, the assets we typically take security on are commercial property. The commercial property doesn’t have to be owned by you, however the owner must be prepared to let you use it as security. To find out more, take a look at: Why You Should Move Your Residential Portfolio to Commercial
Land: Land is another asset that is acceptable as security.
Debenture: On occasions, we are also prepared to take debenture over the shares in the sponsoring Company. We won’t take a debenture if the Company has no value behind it. We need to see a Company that has an excellent order book or other assets that it owns worth far more than any outstanding loans.
Assets Not Accepted as Security on a Loan
It is very important to highlight what is not acceptable as security because we do get offered all sorts.
Residential Property: You cannot take residential property as security, even via a third party. To learn more visit: Can a SSAS purchase residential property?
Security Trust: You cannot offer security trust because the revenue will deem that the pension scheme has come into ownership of an unacceptable asset and that would raise a tax charge against the pension scheme, which is the last thing that you want.
Security on Goods and Chattels: A helpful example of security on goods and chattels would be a yacht. It could sink and is a depreciating asset. So, we cannot take security on goods or chattels.
To re emphasise, ideally security should be taken out on land or commercial property that is worth more than the loan and interest.
Considering a Loan Back to Your Company? Speak to Us
If you’re going to make loans back to the sponsoring employer, and it is a great facility offered inside SSAS Pension, you need to make sure that you take the commitment very seriously indeed.
We’d love to chat with you. Book a call with us today.
For more information about SSAS pensions and the benefits available to you, visit our SSAS video hub.
