Tag: pension

Your SSAS pension can provide for your family AND future generations too

You really are never to young to join a SSAS
Your small, self-administered pension scheme (SSAS) doesn’t just provide death and retirement benefits for its members in a tax efficient way – It can do way more for you and your family. Due to their restriction of having no more than 11 members, SSAS schemes are often favoured by smaller businesses where the company directors, family members and senior executives are the beneficiaries. Especially as they allow for members of the family who don’t work for the company to also be included.

Not only that, but a SSAS pension is an asset that can be passed down the family through the generations. Best of all, as a pension it’s legally protected from personal or company creditors so it’s a safe place for the long-term storage of assets.

The big benefit to your family
As investments are held in the names of all of the SSAS trustees, this common ownership means that each member of the SSAS holds a specific portion of the SSAS’s assets. This makes ownership of assets like properties far cheaper and simpler to deal with than they would be if the asset were shared between three or more self-invested pensions (SIPP). The other big benefit of a SSAS, is that individuals can choose their own investments, which is really handy if the business is involved in property or land. Also, where individuals are saving in order to invest in property or land, a SSAS can really help fulfil that ambition (see my previous blog on SSAS property purchase).

What happens when a member retires?
Once a member of the SSAS retires, they have the same options as any other member of a defined contribution pension scheme. This means that you can secure a guaranteed income, take an income from the fund or a combination of the two. If the SSAS is invested in property that is generating and income, this can effectively be remitted out to the member to support their retirement.

Flexibility when it comes to your retirement day
A SSAS allows entrepreneurs to delay the time that they start retirement, as they often retire later than those in employment. It also allows for early retirement from the age of 55 years. Your SSAS will even let you carry on working part-time, receiving some pension and some income at the same time.

Tax Efficient Death Benefits
SSAS benefits payable on death are not normally subject to inheritance tax. If the scheme member dies before the age of 75, their family members can inherit their fund and take tax free withdrawals for life. After the age of 75, payments are subject to income tax at the beneficiary’s normal income tax rate. The fund can be passed down through the generations as long as it lasts. Unlike a conventional non-pension trust, there is no limitation on how long the trust can last. So the pension fund could be providing valuable benefits to multiple generations of the family of the original members. Beneficiaries are immediately entitled to draw benefits and they do not need to wait until they are at least 55.

Other benefits of SSAS to family businesses
Your SSAS can also be a great way to increase your purchasing power, if you’re looking to accrue assets for the future. Please see my previous blogs on using your SSAS to borrow funds for property and stock purchases.

Get it right from day one
With something as complicated as a SSAS, it’s vitally important that you get the right kind of professional advice from a qualified and expert financial adviser who knows this area well. The wrong advice, or no advice at all, could result in significant tax penalties.

As always, we at Bridgewater Financial Services are here to provide expert and independent advice on any questions you have regarding A SSAS pension, or any other financial enquiries you may have.

Stay safe

Purchasing property with your company pension

Your SSAS pension and what it can do for you right now

If you read last weeks blog you’ll know all about how your small, self-administered pension schemes (SSAS) has a loanback facility that you can use to access much needed cash flow. If you haven’t read it, please do.

Well, the joys of your SSAS don’t stop there. It can also be used to purchase property. However, please read on carefully, as there are many do’s and don’ts associated with SSAS schemes and property purchase. Getting it wrong could end up costing you a great deal in tax. 

Who can and can’t be involved in the purchase

If you wish to, your pension scheme can purchase property with other parties such as your company, yourself or another pension scheme. It can even purchase property with an unconnected party. 

However, HMRC do require that the pension trustees obtain independent professional advice to confirm the market values regarding the purchase price or rental, if there is any connection with the pension scheme with the vendor of the property. This must be undertaken in order to comply with HMRC’s ‘arms-length’ requirements regarding the transaction. 

Where there is no connection with the other party, HMRC does not require any independent valuation.

For cases of joint ownership

If your SSAS has purchased the property with a third party, then a Declaration of Trust (DOT) will be required, in order to legally recognise the proportion of ownership held by each party. As this involves your pension scheme, the DOT needs to include pre-emption rights. Where the pension scheme may have to liquidate its investment in order to pay death benefits, it’s usual to offer the co-owner(s) first refusal to buy its share.

Your business, yourself and another party can purchase property jointly. As long as any joint ownership is registered with the Land Registry, any property purchased can also be let back to your own business or an unconnected party. It is however important that the SSAS pension scheme only receives its proportion of the sale proceeds or rental income and it must also ensure that it pays its percentage of all ongoing expenses.  

Buying, selling and letting

If you are considering using your SSAS to purchase a vacant property, then you will be required to ensure that there are sufficient funds available to cover repairs, rates, maintenance and all legal and other costs, as there is no rental income immediately available. This is usually achieved by retaining the relevant sum, which is held back in the pension fund. 

You SHOULD NOT purchase residential property with your SSAS. As residential, and some other types of property, are subject to very significant and costly tax charges if held by a pension scheme. To avoid these onerous tax implications, you really should only consider the purchase of commercial property such as retail, office and industrial buildings. 

Flipping from commercial to residential can be done

As your pension scheme can’t hold residential property without facing extremely high tax charges, if you are looking to purchase a commercial property and flip it to residential, then you need to be aware of what point HMRC deems it to have converted to residential. 

From speaking with architects, it’s our current understanding that the certificate of habitation and the point at which a commercial unit becomes a residential one (as referred to by HMRC), is at the point when the Completion Certificate is issue by the architect. As such, it’s imperative that the property is taken out of the pension scheme PRIOR to the Completion certificate being issued by the architect.

Property types you should and shouldn’t consider

This is a brief list of The Good, The Bad and The Ugly when it comes to property types you can consider for purchase with your SSAS: 

The Good

  • Shops Industrial property Offices
  • Hotels
  • Care Homes
  • Pubs and Restaurants
  • Farmland Development Land
  • Car Parking

The Bad (property types not allowed)

  • Residential Property
  • Holiday lets
  • Timeshares & beach huts
  • Freehold including long leasehold residential (even if only ground rents)
  • Caravans and other moveable property
  • Log cabins
  • Leasehold property with less than 50 years (deemed a “wasting asset”)  

The Ugly (to be avoided despite being commercial)

  • Any un-lettable property that will be sold again in the short term
  • Specialist properties that are difficult to sell
  • Properties with environmental or contamination issues
  • Any property adjacent to your house or garden 

Please note that this is a guide only and you should properly research if the property you are thinking of purchasing complies with HMRC rules.

Where can you raise the finance for the purchase?

Your SSAS is allowed to borrow from any source available; just so long as the loan terms are commercial. Obviously if the source is a bank or building society, then the terms will automatically be commercial. Where the lender is a source that does not have a consumer credit licence, or is connected to you, then you may have to provide accompanying evidence that the terms are commercial. 

Repayment of borrowing

Although you may be able to prove rental income, you should also consider affordability. 

Which is why, at the initial stages of purchase, a Member Trustees should be tasked with considering this aspect. It is also important that you do not rely upon future pension contributions to meet borrowing requirements, as the future payment of contributions is not mandatory.

Borrowing limits

If you are using your SSAS to fund a purchase for the first time, then your first loan can be up to 50% of the net value of the pension scheme. 

For example: 

Pension Scheme value:                                 £100,000 

Maximum borrowing:                                     £50,000 

Amount available to purchase property:   £150,000

  

Get the right advice from day one

Get professional advice on the rules of property purchase, development, leasing, resale or any other aspect of property ownership from a qualified and expert financial adviser who knows this area well. The wrong advice, or no advice at all, could leave you with a whopping great tax bill and a badly damaged pension pot. 

As always, we at Bridgewater Financial Services are here to provide expert and independent advice on any questions you have regarding using your pension to acquire property, or any other financial enquiries you may have. 

Stay safe

 

20-20 vision for your finances

Happy 2020!

We’ve just stepped into a new decade and all the surprises that brings. But as we set off on the next chapter, I always think that the exciting thing is the uncertainty. Yes we know some things are definitely going to happen, like most of our New Year’s resolutions will fall by the wayside, the UK will leave the EU and that we’ll all get older and hopefully a little wiser. 

However when it comes to the markets, we can’t know for sure how they are likely to impact our personal finances. Having said that, we do have the next best thing available to us; our ability to review and amend!

Whatever your long-term plans may be, now is the time to review how the last year or two has performed for you and to put yourself in the right position to take full advantage of the financial opportunities now available. A review of your Savings, Estate Planning, Insurance Covers, Investments and Pensions now will allow you to make any changes and tweaks in your finances in order to make sure that you reach the end of the 2020’s in the financial position that you set out to achieve.

Now’s the perfect time to inspect an ISA

If you don’t currently have an ISA in your portfolio, then can I suggest that you add one to your list of things to consider this year.

It’s a great tax-efficient way of approaching investments, as your returns are free of income and capital gains tax. You can invest in an ISA up to a limit of £20,000 of which £4,000 can be paid into a LISA (for those eligible). 

As the annual deadline for ISA’s is 5 April 2020, this means that you potentially have two bites of the cherry available to you throughout 2020. By that I mean that you can currently take advantage of the ISA Tax-free opportunity for the remaining of the tax year, plus you can then do the same again on 6 April 2020. Please don’t leave it too late though, as some providers take several working days to process new ISAs, so leaving things until the beginning of April may mean you miss the closing deadline.

Take a look at a LPA And Will

The chances are that you could be amongst over 50% of the UK adults, including many in their 50’s and 60’s, who don’t currently have a Will in place. If that’s the case, could I respectfully suggest that writing one really should be high on your financial agenda for 2020. 

Whilst you may already have a Will in place, or high on your ‘To Do’ list, can I also prompt you to consider Lasting Power of Attorney (LPA), as incapacity often strikes without warning. Which means that sorting out a LPA can save your estate and it’s beneficiaries considerable costs and avoid unnecessary and lengthy delays.

If this all sounds a bit daunting, please be assured that putting Will and a LPA in place is nowhere near as difficult or costly as many people think. If you are unsure regarding whom to approach to best sort these things out, then start by contacting us. We can easily arrange Wills and LPAs through our sister company Bridgewater Wealth Protection www.bridgewaterwp.com

If you do already have a Will or LPA, then please take this reminder as an opportunity to review it. Checking that it is up to date and that it reflects your current wishes.

Improve your Insurance

Even if you have insurance covers in place, now is an opportune time to review things. Our advice would be to just make sure that each plan covers you for everything you need and that the costs are correct. Your circumstances may well have changed since you took any cover out. If that’s the case, then it’s critical that you ensure you are covered for all you require and that there are no plans available that could provide better cover and possibly a lower premium too.

The wrong product can end up costing you a great deal of unnecessary expense and stress, so please take the time to review and compare cover options.

Investigate your Investments

After a bumpy year (The Queen’s words, not mine) in politics and the markets, now is an excellent time to take stock and to just check that your investment strategy is on course to achieve your goals. 

An excellent starting point would be the latest report regarding your mutual funds. There you can check to make sure that they still match your appetite for risk and that you are also happy with where your money is being invested.


A good tip, for when you consider your investments, especially when thinking about your exposure to risk, is to always include your pension, ISA’s funds and stocks together. Do this even when the funds are spread around different accounts and investment products, that way you will get a better feel for your overall portfolio.

Peer into your pension

Lastly and certainly not least, is your pension. 

Your pension is one of the most valuable assets you can have, yet it often gets overlooked; and I feel that more often than not, we don’t give pensions the attention that they deserve. 

Regular reviews of your Pension makes excellent financial sense, especially as legislation has changed massively in the last few years. So if you haven’t recently reviewed your pension position, then now would be a very good moment to do so.

During your review, ask yourself the following questions:

• Are the level of your contributions correct? Too little could leave you
wanting in retirement and too much could create problems with your
Reduced Lifetime Allowance
• Does the strategy still fit with your time horizon, changes in your current
situation or attitudes to your investment risk?
• Is your pension scheme up to date and able to take advantage of the new
pension freedoms, or is it an older scheme that can’t benefit?
• Does your pension fit with your retirement and estate planning?
• If your pension is a Final Salary Scheme, then with the increases in
transfer values, is it worth requesting a transfer value and restructuring
the pension?

Although this isn’t every question you should ask, they are certainly questions you should know the answers to, if you want to ensure that your pension is in the best place it can be.

We’re here to help whenever you need us

Although no one can see into the future, having a close look at your finances now is the difference between approaching 2020 with a clear financial strategy or setting yourself up for a cry of ‘I should have gone to Specsavers’ later in the year! 

I hope that this blog goes someway to starting the new financial year off on the right foot. If however there is something specific you would like to talk to us about regarding your plans, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

Wishing you all a Happy and Prosperous 2020.