SSAS schemes are registered pension schemes that are not regulated by the financial services authority. The members are usually directors or key employees of the sponsoring employer. A SSAS, whilst subject to the same rules relating to contributions and benefits as an insured company arrangement, has considerably greater flexibility and control over the scheme’s investment policies and its underlying assets

One of the benefits of this is that a SSAS scheme can loan back money to the company. This is attractive for the company and the pension fund as the pension fund can release cash on which it was probably getting very little interest into a secure loan, as according to HMRC rules, the loan has to be secured on an asset, at typically a couple of percentage points above base, which is probably much cheaper than any bank funding in today’s market.

a SSAS scheme can loan back money to the company.

Up to 50% of the value of the scheme can be lent to the sponsoring company and the scheme has to charge a minimum of 1% above base. The pension scheme would also need a first charge on an asset for the value of the loan plus interest, though this does not need to be a company asset.

The length of the loan cannot be longer than five years and it cannot be interest free. Assets purchased have to be acceptable assets, but can be commercial property or intellectual property.

Also, loans from the pension fund can be used to buy both physical and intellectual property. With intellectual property, such as a trademark, there will be recurring royalty fees and these can then be paid into the pension fund tax free. for instance, one of our pharmaceutical client companies recently used 50% of the value of its SSAS fund to buy the company’s intellectual property and then the royalty payments were paid back tax free into the scheme.

Over and above providing funding, SSAS funds have one further benefit – they can be converted into a scheme pension, which means at age 75, the company owner does not face the possibility of a potential 80% tax charge as can happen with some self invested pension schemes. A consequence many business owners would be more than happy to avoid.

During the currenct economic conditions we are seeing and reading an awful lot of information regarding job losses and business failures.  Certainly, times are becoming more financially difficult so here are a few key points to help business owners prepare a little better.

1.  Maintain a Cash Flow Forecast

List down all the cash inflows and outflows for you business and try to look forward 3 months.  If you can forsee a period where cash flow maybe tight then speak to your bank about it now.  The bank will be more sympathetic now rather than when the situation becomes desperate.

Also keep on top af the people or companies who owe you money (debtors).  Do not assume that all you are owed will be paid.  Try to plan for any debtor who is unable to pay.

2.  Reconciling Your Bank Account

Don’t just look at your balance.  Make sure that the cheques you have written historically have been presented and cleared your account.  Don’t be taken by surprise when that cheque you wrote 2 months ago is suddenly hitting you current account balance.

3.  Reviewing You Own Salary

Can the business continue to manage the level of salary or drawings you take from your business or can the world cruise be put off for a year or two.  Leaving a little extra cash in the business will allow you to mitigate risks like debtors not paying (see point 2).  Assuming the risk passes in the future, you can still draw the money then take that cruise.  I’m sure you’ll have earned it.

4.  Review Your Overheads

Consider the effectiveness of every overhead (staff, premesis, service providers etc) you have and see if the overhead can be squeezed a little more in terms of its efficiency.  If it can be made more efficient, can it be provided cheaper.  Even consider if it can be provided by someone else.

Simpson FInancial Services is a privately owned business like yours.  In that, we have experience in these matters.  Where we think your circumstances would be even better served by other professionals we will make you aware of that. 

Contact us and arrange a meeting today to discuss these aspects of buisness planning in more detail.