Lending from a SSAS: What Business owners need to know

Introduction

A SSAS can, in certain circumstances, lend money to a sponsoring employer. This feature is often used by business owners seeking flexible funding arrangements outside of traditional lending channels.

However, SSAS loans are highly regulated and must meet strict HMRC criteria.

How SSAS lending works

A SSAS may lend up to a permitted proportion of its fund value to the sponsoring employer. The loan must be:

• Secured (typically with first charge security)

• On commercial terms

• Structured with a clear repayment schedule

• No longer than the permitted maximum term (typically 5 years, with restrictions on renewal)

Interest must be charged at a commercial rate and paid into the pension scheme.

Why businesses use SSAS loans

SSAS lending can be useful where businesses require:

• Short to medium-term funding

• Flexibility outside of traditional bank lending

• A way to recycle pension capital back into the business

For some business owners, it allows pension assets to actively support business growth.

Key risks and responsibilities

SSAS lending is not without risk. Trustees must ensure:

• The loan is properly secured

• The borrowing business can service repayments

• HMRC rules are strictly followed

Failure to comply can result in significant tax consequences.

Conclusion

When structured correctly, SSAS lending can be a valuable tool for business owners. However, it must always be approached with caution, proper security and clear governance.