Tag: SIPP

Borrowing money from a SIPP or SSAS

Final Salary schemes have pretty much ceased to exist, Stakeholder Pensions never really caught on, so the majority of us have one of the following:

Personal Pension Plan – most people have or have had one of these, its the kind of scheme where your IFA comes along every year, asks you how much risk you want to take and then invests your pension in a Managed Fund or similar.

SIPPs – Self Invested Personal Pensions – these are a little more expensive but you have a lot more control and you can invest directly into Commercial Property, borrow money to buy Property and you can make loans to unconnected parties

SSAS – Small Self Administered Scheme – these are generally a little more expense than both Personal Pensions and SIPPs but you have even more control and you can lend to your own company

http://www.jameshay.co.uk are great for SIPPs and SSASs, there many other great providers too

You could have a combination of the above and its possible to transfer money between pension plans (but there is normally a fee for the transfer)

When you pay earned money into you pension you will get tax relief at either 20% or a higher rate but its limited to a maximum of your earnings.

Your employer can pay in too, maximum contributions are now £50k

http://www.hmrc.gov.uk/incometax/relief-pension.htm

You can also carry forward unused allowances

http://www.hmrc.gov.uk/pensionschemes/annual-allowance/carry-forward.htm

SIPPs and SSASs can lend money at market rates to unconnected parties without too many restrictions a great explanation of this is given on this link

http://www.curtisbanks.co.uk/assets/downloads/guides/guide-loans.pdf

Alternatively you could use http://www.thincats.com/ or http://www.fundingcircle.com/ or I am sure there are others too

Lets say you are 40% tax payer, you pay in £100k out of earned income, the tax man gives the tax back of £40k, so you have £140k to lend, because its short term lending against assets you will probably be paid interest at 10% to 15%, thats a pretty good return (I appreciate there are risks, as there are with everything in life and of course you should always take professional advice before doing anything).

If you are a business looking for funding perhaps borrowing from a SIPP or SSAS may be the solution, it certainly seems to be catching on. But just be careful who you choose to lend to and against what assets.

steve@bicknells.net

Correction – if you pay in £60k it will be topped up by £40k to £100k if you are a 40% tax payer

Buy your Business Premises with a SIPP

Back in 2002 I created a SIPP syndicate with 10 colleagues and friends, we pooled our pension pots and created self invested pension plans with James Hay http://www.jameshay.co.uk as pension trustees.

Property yeilds are 8% to 10%, basically meaning the rent = 10% of the purchase price. Thats a much better return than most stock market invested pensions.

SIPPs can borrow money too, up to 50% of your fund value, so if you had £100k you could borrow an extra £50k, as the cost of borrowing is less than the yeild you will make a return on the borrowing and your tenant will repay the loan over the life of their lease.

The tenant will have a Full Repairing Insuring lease so they only issue you could have is with void periods.

You can also buy your own business premises using a SIPP.

steve@bicknells.net