Using SSAS for property investments

Unlike a'standard' personal pension, an SSAS pension can invest in a considerably broader range of assets, including commercial property. This enables you to create your own retirement strategy rather than being limited to the funds offered by an insurance provider. In this blog, we will cover the concept of SSAS and define how it can be used as a vehicle for property investment.

1. What is a Small Self-Administered Scheme (SSAS)?
2. Who can use an SSAS Pension scheme?
3. How can an SSAS pension be used as a vehicle for property investment?
4. Investing in property with your Family SSAS Pension
5. Five ways by which you can make money through property pension

What is a small self-administered scheme (SSAS)?

A Small Self-Administered Scheme (SSAS) is a pension trust set up by a limited company or a partnership. SSAS’s are primarily set up by private and family-run limited companies for the benefit of the owner directors and senior employees. The members are also trustees and have control and flexibility over the Scheme assets and investment choices in a tax-efficient environment.

Who can use an SSAS pension scheme?

A Small Self-Administered Program (SSAS) is a self-funded occupational pension scheme created by limited companies (in certain cases, partnerships) for the benefit of their directors, senior employees, and family members.

These plans are established by business owners who want greater control over pension investment decisions and, particularly, the ability to use their pension plans to invest in the business. As such, it is common for each SSAS member to serve as a trustee. As a result, these forms of pension schemes are gaining popularity in the UK among their members due to their flexibility.

How can an SSAS pension be used as a vehicle for property investment?

Establishing a small self-administered scheme (SSAS) pension and investing in property is surprisingly simple. It is an attractive alternative to traditional pension schemes for company directors for a variety of reasons, not the least of which are the long-term benefits it provides to families.

The unique flexibility of this option ensures that you may take advantage of the tax benefits of a pension while investing according to set rules. The SSAS is a separate legal entity and pension trust, providing enviable tax benefits both during the investment and growth phases of your pension and during inheritance.

Investing in property with your family SSAS pension

Property is a popular investment. Such investments have a number of benefits, including the perceived security of bricks and mortar providing constant and consistent returns, as well as the fact that they are a tangible asset with minimal volatility in comparison to equity markets. Property kept under the SSAS is ring-fenced from creditors and is not included in the estate, effectively securing it for future generations.

According to HMRC regulations, SSAS may only invest in or hold commercial property. It cannot invest in or hold residential property 'directly'. However, there are numerous ways to invest 'indirectly' in residential property. To mention a few, these include property loans, bonds, crowdfunding, and loans to third-party property developers. These alternative property investment forms can generate potential growth for the family while having relatively low time management.

Additionally, you may choose to transfer existing property assets to the pension, which protects them from creditors and provides you with favourable tax benefits.

You may choose to purchase your business premises through your SSAS. This effectively transfers the property to the pension. While the property may appreciate in value, if sold as a pension, the SSAS does not pay capital gains tax on the revenue. Although the SSAS owns the asset, because your whole family is a member, the asset is essentially still under their control.

Rent paid for the premise is classified as a business expense, which means your company obtains corporation tax benefits on payments to the SSAS. The rent received by the scheme is not subject to income tax, all of which contributes to the pot's growth.

Alternatively, your SSAS could invest in property loans or bonds. These are loans to property companies that yield a fixed rate of return over a specified period and are fully repaid at the conclusion of the investment term. Likewise, you may invest in property crowdfunding. Alternatively, you might make a third-party loan to a property developer.

These investments have the benefit of allowing indirect access to residential property investment, which is permitted under HMRC rules. This offers the additional benefit of allowing inexperienced property investors to invest hands-off, with smaller pots or without the time commitment required for direct & individual property investments.

Five ways by which you can make money through property pension

1. Increased returns on property investments through the use of a pension -

   Returns on investments can be tailored to your strategy and objectives. Returns paid to the pension fund are income tax-exempt.

2. Combining and reducing fees -

   There is only one set of fees, and all fees can be paid through the SSAS property pension.

3. Exceptional tax efficiency -

   The pension funds are invested and assets are maintained within the pension, which provides exceptionally favourable business, personal, and inheritance tax benefits.

4. The ability to expand your business -

   A SSAS may issue loans to your limited company of up to 50% of the fund's value. Thus, you may deposit profits and then withdraw them as a loan, resulting in increased tax relief.

5. Capital gains tax benefits -

   Assets (such as property) can be kept in the SSAS. Profits from their sale are not subject to Capital Gains tax.

Conclusion

The SSAS pension provides a chance for property investment that, if managed properly, can benefit your family for years to come. dns offers advice on SSAS pensions and property investing, successfully providing company directors with the required tools and knowledge. Many of our clients have invested in property and increased their pension funds in order to ensure a comfortable retirement while minimising their tax exposure wherever possible. Additionally, the SSAS pension can continue to operate long after the members have passed away, holding assets in trust and paying benefits to their dependents.

If you would like to speak with a property expert and want to know more about using SSAS for property investments, please contact dns right now on 03330886686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

About the author

Owais Bombaywala
Working closely with individuals and businesses to help grow their business requires a significant amount of experience and industry knowledge. Owais is BA (Hons) Accounting and Finance and Member of ACCA. Besides being a compliance champion, he specialises in Property tax planning. With over 7 years of experience in Accountancy and Tax world, our clients count on us to give them timely and up to date advise to help them make the right move. Owais works closely with some of the DNS’s most valued clients to give them the confidence they need to focus on their business. He is known for his calm nature and proactive approach. At DNS, we proud to be a modern and client centric firm. Our advise doesn’t just look at what’s best for your business moreover our aim is to help you achieve your personal goals. Away from work, he resolve family disputes and provide care and support to elderly people. He is a founding member of Human welfare organisation Hounslow.