How Exactly Company Directors Can Access Up To 75% Of Their Pension Funds TAX FREE

How is this possible?

There has been a lot of discussion since the new pension freedoms were introduced with regard to how much an individual can take from their pension “pot” and what is and isn’t advisable.

The conventional route for most people in a Defined Contribution (DC) pension scheme on retirement at aged 55 and over was to take a 25% tax free lump sum and invest the remaining 75% in an annuity, which basically meant them handing this over to an insurance company in return for a regular monthly income for life.

The advent of the new pension freedoms saw a fantastic opportunity for many individuals wishing to exercise greater control over their retirement plans and property investors in particular, wanting to move their funds away from the volatility of the traditional equity market investments.

With a Small Self Administered Scheme (SSAS) pension there is in fact a way of using up to 75% of your pension fund in a tax efficient manner through utilising the 25% tax free lump sum and providing a loan of up to 50% of your pension fund to your company. Amazingly not everyone was even aware that these pensions existed or the difference which they could make to their financial futures.

How does it work?

As a company director of your own limited company it is possible to set up a SSAS pension, which is effectively a company pension scheme. As mentioned previously, at age 55 you are able to take 25% of the fund as a tax free lump sum and with a SSAS pension you can in addition to this make a loan to your company of up to 50% of the original fund value, hence releasing a total of 75% of the fund to help you grow your business and ultimately your pension “pot”. Even if you’re under 55 you are still able to set up a SSAS pension and benefit from the loan back facility this offers. Below is an example of how this would work in practice.

Existing pension fund value = £100,000

Loan to company of 50% of fund = £50,000

Tax free lump sum of 25% = £25,000

Total funds released = £75,000

Total funds remaining = £25,000

If you are under 55 you can still benefit from a loan back from a SSAS pension. Although pension rules dictate that you will not be able to access the 25% tax free lump sum you could still make a huge difference to your business and ultimately your final pension fund.

Invest your pension in property

A SSAS has all of the benefits associated with a traditional pension scheme or SIPP (Self Invested Personal Pension) such as personal/corporation tax relief, flexible drawdown, tax free growth of assets and also a much wider investment choice. For instance, the remaining funds within the pension could be invested in a completely hands off property bond, giving the holder fixed return of between 6 and 12% per annum over a fixed term with the security of a 1st legal charge over physical property as the underlying asset, something which over 1000 property investors have benefitted from through The Landlords Pension for over 13 years.

In Summary

If you are a limited company director who wishes to take control of your own frozen or existing pension, who wants to grow your business by accessing up to 75% of your pension fund and who wants to move away from the volatility of stock market investments to invest in either a hands on or hands off fixed return property portfolio then The Landlords Pension can help you achieve your goals.