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The PSG magic... revealed

Two business partners (the clients) run a Limited Company that manufactures steel products for the construction industry. They operate from a commercial property, owned by the company, worth £250,000 (confirmed by an open market valuation) with no outstanding mortgage.

The business cannot keep up with demand for its products due to lack of cash which is clearly stifling growth and limiting profits.

Traditional commercial bank lending opportunities are either not attractive or not available at all and alternative funding sources are prohibitively expensive, leaving little scope to deal with the cash-flow issues in the business.

Both clients have built up pension savings over the years totalling about £150,000 but these are spread across a number of insured pension arrangements and SIPPs.  Their existing pension scheme investments are performing poorly and added to that, there is a duplication of costs and charges associated with their schemes.  Also, the clients have little in the way of control or opportunities to make these pensions work well for them. Neither of the individuals have received any pension contributions for years.

Action needed

The Limited Company established a PSG SSAS with the clients appointed as the member Trustees and PSG providing Scheme Administrator
and Independent Trustee services.

The clients transferred their existing pension schemes, as cash, into their new SSAS to consolidate their pension savings into one scheme, under the direct control of the SSAS Trustees.

The Trustees lent £75,000 from the clients SSAS (maximum loan of 50% of the net asset value of the SSAS) to the clients’ Company, secured by a first charge and backed by an open market property valuation, for the purpose of business expansion.

The loan was made for a term of 5 years, at a fixed interest rate of 4.5% (calculated at 4% above bank base rate), with equal quarterly in arears capital and interest repayments.

What happened next

The company used the funds provided to finance its trade, enabling expansion leading to increased turnover and profitability.

The SSAS Trustees invested the scheme’s remaining cash into other permitted investments, self-directed by the clients.

The company paid pension contributions annually into the SSAS in subsequent years to mitigate Corporation Tax and to grow the client’s
pension savings.

Capital repayments, loan interest received and pension contributions received were invested for further capital growth and investment return.

Tax and other advantages

Alternative options

A charge could be taken over alternative unencumbered assets owned by the company or the clients personally, including property, intellectual property or other tangible assets, subject to a sound open market asset valuation.

Other applications

A SSAS Sponsoring Employer Loan is a useful and tax efficient way to structure a commercial property development loan on a phased drawdown basis.

See PSG’s separate case study:

Commercial Property Development Loans

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“PSG took the time to build a relationship with me, they understand what I need and they’ve got the technical expertise and customer service to consistently meet the high standards expected by our clients"

Gary Neill
Ashtre Financial Services 

PSG SSAS (UK)

Lovingly crafted and still a sharp tool in anyone’s box, the SSAS is the product of choice for company directors and ours is the sharpest of the sharp.

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