Pensions are incredibly tax-efficient. When aligned with your long-term goals, your insurance-based personal pension or your workplace scheme can provide for your dream retirement, relatively hassle-free.

But what if you’re an experienced investor looking to take back control of your personal pension funds? Or you’re a business owner looking to use your pension to lend money back to your business? 

If either of these is the case, you might want to consider different pension arrangements. 

Keep reading to find out all you need to know about self-invested personal pensions (SIPP) and small self-administered schemes (SSAS). Plus, could a SIPP or SSAS be right for you?

A SIPP can give you more control

Putting yourself in charge of your pension investments might seem daunting, but in many ways, a SIPP operates exactly the same as your existing personal pension.

You receive tax relief on your contributions and have similar options when you come to retire. But you’ll also have a wider choice of investment options and greater flexibility. There’s also the option to borrow up to 50% of the fund’s net value to purchase business or commercial property.

Take a SIPP with Boolers, and you can add the bespoke guidance of a SIPP adviser to ensure you make the best choices for you. 

We think of this form of “self-invested” pension as “member-directed” and it could help you to see impressive returns, aligned to your long-term goals.

A SIPP might be a good option if you:

  • Have pension funds exceeding £150,000
  • Are looking to play a bigger role in managing your pension
  • Want to consider the purchase of commercial property
  • Can accept potentially higher charges for a more hands-on approach
  • Have alternative income sources at retirement.

At Boolers, we have decades of experience providing SIPP pension advice so contact us now if you’d like to discuss your pension with us.

A SSAS is a pension fund registered by your business 

A small self-administered scheme (SSAS) is an occupational scheme that you can set up as a director of your company.

The trust-based plan has all the tax efficiency of a personal pension, the flexibility of a SIPP, and the added ability to allow your pension fund to interact directly with your business. 

A SSAS can have up to 12 members, as well as the option to borrow up to 50% of the fund’s net value to purchase business or commercial property. 

HMRC rules dictate that a SSAS must be able to show that the scheme is being administered by an appropriate professional and that its trustees are fit and proper.

With years of experience, we could help you to set up or manage a struggling SSAS.

You might consider a SSAS if you:

  • Have combined pension funds exceeding £150,000
  • Want to pool your pension wealth with that of your spouse, business partner or family
  • Would like to lend money from your pension to your limited company
  • Want to consider the purchase of commercial property
  • Are looking for the added control and flexibility of a SIPP within your occupational scheme.

You can use your pension to help your business and buy commercial property

Rules around pension borrowing can be incredibly complex. For example, while a SSAS can be used to lend money to a sponsoring employer, a SIPP can’t make loans to any connected party, including you or your business.

You can, though, use both a SIPP and a SSAS to help buy your business’s commercial property. 

Strict rules apply – and breaching them could mean you are liable to an HMRC unauthorised payment charge – but you can usually borrow up to 50% of your pension funds value.

When you borrow from a SIPP or SSAS to buy a commercial property, that property is then leased back to your business, with rent payable into the pension. This can be hugely tax-efficient.

A SSAS has the added benefit that you can borrow from it to help your business, as long as the loan satisfies five strict HMRC rules:

  1. You can only borrow up to 50% of your pension’s net value.
  2. The loan must be made to the sponsoring employer and secured as a first charge on an acceptable asset.
  3. The interest rate – selected by the scheme members – must be a “commercial rate” (defined as 1% above the average base rate of the six leading high-street banks).
  4. The loan repayment term must be five years or less.
  5. Repayments must comprise equal instalments of capital and interest.

Keeping within these rules can be complicated but remember that we are on hand to help.

Get in touch

This year at Boolers, we are celebrating 40 years of providing pension and investment advice in Leicester. Get in touch now and we could help you and your business make the most of your private and occupational pensions. If you would like to discuss opening a SIPP or SSAS, please contact us today. 

Please note

The value of your investment 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. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Workplace pensions are regulated by The Pension Regulator.