Gareth Bertram explains how a property SSAS pension works and why it can be advantageous.
Investing in property can be a potentially lucrative business move, but what are your options to make this happen? One way that this can be achieved is through a pension that allows you to invest in property such as an SSAS pension.
There are many advantages to a SSAS pension but let’s look at how it really works for you!
What can a SSAS do for me and my business?
A SSAS is available to company directors and is a tax-free savings account into which existing pension funds can be transferred for use in their business (i.e. stock purchases or capital injections) or for the acquisition of property. Any gains made are tax free and a SSAS provides all the benefits of any standard personal pension such as drawdown at age 55 including 25% tax free lump sums and annual contributions of up to £40,000.
The facility to use funds held in the SSAS for business purposes and/or the acquisition of property are the main reasons that company directors switch to a SSAS. There is course the satisfaction of knowing that the pensions funds are being used by the directors for the benefit of their company rather than locked in a hedge fund or share investment.
Who manages your property SSAS?
All investment and scheme choices are decided upon jointly by the company directors who become known as the trustees of the SSAS. Many schemes appoint a professional SSAS trustee to administer the scheme and support the company directors in their trusteeship.
The Landlord’s Pension always advise a professional trustee is appointed to ensure that everything is done correctly and within HMRC regulations. Duties of the scheme administrator include ensuring :
Tax reporting obligations are met
The scheme is registered with The Pensions Regulator
That all trustees are informed and included in scheme decisions, as well as updated with the scheme’s performance
The benefits basics of your property SSAS pension
A SSAS is extremely flexible and allows you full control over how your pension funds are invested. The SSAS can invest money from its pot into the business, if company directors (the SSAS trustees) choose to do so.
With a SSAS pension, investment can also be made into:
Stocks & shares
Funds and much more
Another investment example trustees might choose is to buy their own business premises. The advantage of this is that the company can then lease the building from the SSAS, paying it rent. The rent paid is classified as a business expense, taking advantage of the associated tax benefits.
The SSAS is earning rent and as it is within the environment of a pension, pays no income tax. The building may increase in value and when the SSAS sells it, as a pension, is not liable for capital gains tax. The SSAS may also lease the building, or part of the building, to a third party. This can all take place within the tax efficient environment of the SSAS pension.
Drawing your benefits from a SSAS pension?
At age 55, as with other pensions, you are entitled to withdraw up to 25% as a tax-free lump sum. So, similarly, with a SSAS, you can withdraw 25% of ‘your share’ of the SSAS. However, you do not need to do this straight away and you may wish to take it in the form of assets owned by the SSAS.
How does your whole family benefit from your property SSAS pension investments?
The beauty of a SSAS pension is that it acts as a tax efficient savings wrapper. It also allows you to ring-fence assets for the scheme, yourself and future generations. As a pension, assets held within the SSAS are exempt from inheritance tax. All trustees of a SSAS nominate their own beneficiary, to whom their share will be transferred. This means that a SSAS really is a ‘family’ pension scheme that can be passed down through the generations.
Ensure your SSAS is working hard for your gain
The above is just a taste of the advantages of a property SSAS pension over other normal pensions. However, the options for using your SSAS to grow your business, increase your portfolio and grow your pension to fund your retirement are many.
The Landlord’s Pension are experts in SSAS pensions and property investment and can offer the tools and the knowledge required to ensure you are in full control. Positioning yourself to fulfil your business, personal and family goals, whilst ensuring you can achieve the retirement you desire is made achievable with the power of the property SSAS pension.
The process of creating a Property SSAS
Be sure to get in touch with a Partner at Wellers or find out more by visiting The Landlord's Pension website.
The content of this post is up to date and relevant as at 26/02/2020.
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