If you are considering funding for a business, have you considered the potential for funding your business via a pension scheme? Many small businesses/enterprises have director owned pension schemes with around 40 per cent of these businesses being able to release funds via these. To be able to release funds from the scheme the company must be valued and trademarked. This is the company’s IP (intellectual property.) Using this valuation to put into place a pension-led funding programme for your business requires detailed information regarding the company accounts, track records, business plan and current In 2004 the IP of a company was classified as a valid asset class for use in pension-led business funding. This is a little known fact, but it could provide you with the funding you need to further your business without the need to rely on a third party funder.
If you have a pension which is worth £50,000 or more you could find that this option is perfect for you. You could find that engaging in this kind of funding will in fact maximise the value of your pension currently, and for after your retirement, giving better returns than traditional pension plans.
The two most common pension plans used for this are an SIPP or an SSAS.
– SIPP: Self Invested Pension Plan – This type of pension plan has a great amount of flexibility to it. It allows you to choose from a wider range of investments than a normal pension scheme would and also allows you to draw benefits from the scheme. On average you will receive a minimum annual charge of £250 plus VAT for a SIPP. The maximum amount that can be held in a scheme of this kind is the same as applies to all individuals, whatever pension schemes they use and however many they use. The lifetime allowance for tax free pensions over a lifetime is £1.8 million.
– SSAS: Small Self Administered Scheme – Usually the Directors of a company will all be a member of this company run scheme. This again allows for money to be put back into the business from the scheme itself. Loans can be made back to the sponsoring employer, as long as:-
1. The loan does not exceed 50% of the net market value of the scheme’s assets
2. The loan’s term may not be longer than 5 years
3. Interest must be charged at 1% more than the bank base rate