By Lynne Gowers on 15th May 2017

Is there a single solution to my retirement, tax and business planning objectives?

Retirement

The answer may well be yes, argues Simon Green, a consultant with wealth management specialists Mattioli Woods.
SIPPs (Self Invested Personal Pensions) and SSASs (Small Self-Administered Schemes) have existed since the 1980s to deliver flexible solutions to meet your retirement, tax and business planning objectives.
The crucial thing to remember in pension planning is that any existing plan you may have could be failing to meet your needs. 

A key example is a client of mine who wrongly believed that he would be able to leave any remaining benefits in a final salary pension scheme to his two children.  The reality was that 50 per cent of the fund would be wiped out on his death and the remainder lost on the passing of his wife – with nothing left to his children.

The key message here is to have your pension holdings reviewed to check that there are no nasty surprises lurking.

Every business owner is familiar with the term ‘pre-tax profits’.  Essentially this is the figure that Her Majesty’s Revenue & Customs will be looking at before taking a percentage.

There are a wide range of things that can be done to minimise this figure, and making a contribution from it to your pension plan is a solution that resonates best with many.

A pension contribution is a business expense and one that can be legitimately incurred. Essentially, reducing your pre-tax profits and building a pension pot for your retirement can operate hand in hand.

Having accrued a sizeable pension – or being in the position of building a retirement pot – pension scheme holders often believe that they must continue to hold it in conventional funds over which they have limited choice.

That is true with most types of pensions, but SIPPs and SSASs offer flexibility more in line with the thinking of most entrepreneurs.

The funds held in both types of schemes can be used to purchase commercial property.  This could be the premises from which your business operates.

The benefits of this are that any rental income generated for the pension fund – as well as any profits on its sale – are free of relevant taxes due to the beneficial tax treatment of pension scheme holdings.

SSAS funds can be lent to the linked company sponsoring the scheme, subject to conditions.  The key benefit of this is that it can deliver a source of funding to a business for development or expansion when other routes seem cumbersome or drawn out.

The cost of servicing a bank loan is interest that could be paid into your pension fund.  Likewise SIPP funds can also be used to purchase a stake in an unquoted company shareholding offering a similar source of needed finance outside of traditional routes.

Pension planning for business owners is never a one-size-fits-all approach and only certain aspects of the above may be relevant to your personal situation.

But reviewing your existing pensions, and potentially integrating them with your tax and business needs, really can deliver beneficial outcomes.

Lynne Gowers Written by Lynne Gowers

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