Setting up a SSAS (Small Self Administered Scheme) to buy commercial property

Our Client wanted to sell his business premises

One of our existing SSAS (Small Self Administered Scheme) Clients had put the premises which his Company traded from on the market.  The premises were owned by his SSAS and the objective of the sale was to release funds so that he could take his Pension Commencement Lump Sum and Pension as, now that he was in his 60s, he was planning to wind up his company.

The first people to view the premises were three Directors of a new company who had previously worked for a large utility company in the West Midlands. They had identified what they believed was a big future market for their company in providing high voltage solutions to businesses, their former employers having pulled out of this market.

The three Directors were looking for premises to trade out of, but it soon became clear that although they liked the property, our Client’s premises were not suitable for their business at that stage.  However, our Client suggested that they should consider using their pension schemes to do so, as it had worked very well for him with his Small Self Administered Scheme.

We advised the interested directors to set up a Small Self Administered Scheme

The three Directors liked the sound of this so our Client introduced Gay Nebel to them, and an initial meeting was held to talk through the possibilities.  We quickly ascertained that their major existing retirement provision was in final salary schemes and Gay advised that it was not a good idea to transfer money out of these. Instead, it was agreed to set them all up with Stakeholder Pensions into which their company’s profits would be placed, with funds being subsequently drawn upon and transferred to a SSAS in their three names, as and when they were ready to buy the property.

Regular contributions were paid into these Stakeholder Pensions and after only a year of trading it became apparent that the new company was making larger profits than forecast. To take advantage of this, a Small Self Administered Scheme was quickly set up for the three Directors with PML Trustees Ltd and administered by Pensions Management Limited.  The Stakeholder Pensions were transferred into the SSAS with additional large contributions being made just prior to the company’s year-end.

The SSAS bought the director’s business premises

In the meantime the Directors’ company had bought some suitable premises, using bank borrowing, and within 2½ years of setting up the Small Self Administered Scheme the Trustees bought these premises off the Company, with no borrowing needed by the Trustees.

Three years down the line the Company had expanded so well that it needed new premises and again the Small Self Administered Scheme bought the larger premises.  This purchase was subject to VAT.  The pension scheme registered for VAT before the purchase, paid the purchase price and VAT and then immediately reclaimed the VAT.  All £60k of it!  The original building has now been sub-let to a Third Party so the SSAS is now receiving two rental income streams, all of which is being invested on a monthly basis.

A successful outcome

So from a starting point where the three Directors only had final salary pension schemes with their former company, they now have a successful business and a SSAS whose assets are now well diversified into property, stocks and shares and a 12 month fixed term deposit with the bank.

At PML we aim to deliver excellence in Small Self Administered Schemes. If you would like to see what we can do for you, please contact us for an initial, no commitment, chat.

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