Your pension is a huge asset, designed to provide you with an income for the rest of your life after work. But, through careful planning, it can also be used to help your business.

You might consider:

  • Loaning back from a small self-administered scheme (SSAS)
  • Using SSAS or self-invested pension (SIPP) funds to help buy business premises
  • Making tax-efficient contributions from your business income.

Keep reading for a closer look at the pros and cons of intertwining your business’s performance with your long-term retirement plans.

1. Using a SSAS to loan back to an employer

There are many reasons why your business might need a sudden cash injection, from rapid growth to new opportunities too good to miss. While bank loans offer one pathway, you might consider using your pension too.

A SSAS is a trust-based, occupational scheme which you can set up as a company director. It can include 12 members and is able to lend money to your business.

These loans can help to free up cash, typically more quickly and with less underwriting than a bank loan, but HMRC guidelines are strict.

Tax charges will apply if you fail to meet any of the following rules:

  • The borrowed amount must total less than 50% of your pension’s net value.
  • Loans must be secured as a first charge on an acceptable asset and made to the sponsoring employer.
  • Interest must be paid at a “commercial” rate, defined as 1% above the average base rate of the six leading high street banks.
  • The repayment term must be set at five years or less.
  • Repayments must comprise equal instalments of capital and interest.

Remember, these rules are strict and complicated to adhere to, but we’re on hand to help.

2. Using a SIPP or SSAS to help buy your business’s commercial property

A SSAS can help fund a commercial property purchase. So too can a SIPP.

Again, strict rules apply and falling foul of them could lead to additional tax charges.

Typically, you can borrow up to 50% of your pension fund to help facilitate the purchase and the property is then leased back to your business, with rent payable into the pension. This is incredibly tax-efficient.

There are other benefits too, including:

  • Additional pension contributions (within the Annual Allowance of £60,000 for the 2024/25 tax year) used to aid the purchase will likely qualify for tax relief.
  • If the property grows in value while it is owned by the SIPP, that growth is tax-free.
  • The property you buy does not need to be connected to your own business. You can usually buy or invest in any freehold or leasehold commercial property in the UK.

These rules apply to both a SIPP and a SSAS.

3. Paying into and withdrawing from your pension

Employer contributions from business income

You can tax-efficiently contribute up to the Annual Allowance each year.

You’ll receive tax relief on your contributions and they’ll be free of National Insurance (NI) too, a saving of 13.8% during 2024/25.

Pension contributions can come from pre-taxed company income and are classified as “allowable expenses”. The tax relief your business receives will lower your Corporation Tax bill while helping to boost your retirement savings pot.

The option to withdraw money from your pension

Once you reach the minimum retirement age of 55 (rising to 57 in 2028) you can begin to withdraw retirement funds.

If your business needs cash input, you might choose to use some of these pension funds to help your company.

Just remember, your pension is designed to provide you with an income for the rest of your life. If you choose to link your pension and your business’s performance you could be putting your planned retirement lifestyle in jeopardy.

Get in touch

A well-managed strategy gives you the best chance of making the right tax-efficient choices for you while remaining on track to your pension goals and aiding your business. Boolers’ expert financial advice can help here, so be sure to speak to us before you make any big company or pension decisions.

Contact us now to see how our team of dedicated financial professionals can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Workplace pensions are regulated by The Pension Regulator.