As a seasoned property investor who thrives on the potential of buying at auction, you’re always seeking ways to maximise your returns while cutting costs and taxes.
A SSAS pension can be a powerful tool in your investment arsenal, offering the flexibility and control you need to take full advantage of property opportunities.
By using your SSAS to buy property at auction, you can unlock a range of financial benefits that go beyond what traditional investment methods offer, all while building a strong foundation for future growth.
A SSAS (Small Self-Administered Scheme) pension is a type of company pension specifically designed for the UK directors of small limited companies, and is particularly powerful for property businesses.
The key difference between a SSAS and other pension schemes is the level of control it gives you over your investments, including property.
One of the most exciting things about a SSAS is that you can take your old, stagnant pensions – whether personal pensions or workplace pensions – and consolidate them into a single pot. This new SSAS can then be used as a flexible source of funding to buy commercial property, including properties bought at auction, amongst other things.
Essentially, you’re turning your old pensions into a powerful tool to fuel your property investments.
Below, we’ll highlight 7 of the main advantages of using a SSAS to acquire property assets via an auction house.
One of the most significant advantages of using a SSAS pension is tax efficiency. Contributions to your SSAS from company profits are tax-deductible, reducing your corporation tax bill. Additionally, any growth within the SSAS is tax-free.
This means rental income and capital gains from property investments within the SSAS are not subject to income tax or capital gains tax, allowing your pension pot to grow more
effectively.
With a SSAS, you have full control over your pension funds. Unlike traditional pension schemes where your money is managed by third parties, a SSAS allows you to decide how
and where to invest.
This control enables you to align your pension investments with your business goals and take advantage of property opportunities as they arise.
A unique feature of a SSAS is its ability to provide low-cost finance to your business through a ‘SSAS Loanback’. Your SSAS can lend up to 50% of its value back to your company for
any genuine business purpose, including property investments.
This loan typically comes at a low interest rate, significantly reducing your finance costs and accelerating your investment plans.
Adding property to your SSAS pension portfolio diversifies your investments. This diversification helps balance risk and reward, ensuring you’re not putting all your eggs in one
basket.
By spreading investments across different asset classes, you can create a more stable and resilient pension portfolio.
A SSAS pension allows you to include family members as scheme members. This means your spouse, partner, and adult children can also benefit from the scheme.
Additionally, SSAS pensions are not subject to inheritance tax, allowing you to leave a substantial legacy to your children. Involving family members in the SSAS helps teach them about wealth building and management, ensuring the sustainability of family wealth across generations.
Investing through a SSAS can protect your wealth from business risks such as insolvency.
SSAS funds are separate from your business assets, safeguarding your pension wealth from creditors if your business encounters financial difficulties. This separation provides a safety net, ensuring your pension wealth remains secure regardless of business challenges.
A SSAS is a powerful tool for ambitious property investors looking to grow their business. It allows you to leverage your pension funds for various property-related activities, from
purchasing and developing properties to providing bridging loans.
This flexibility can fuel your growth plans and help you achieve your financial goals faster. Additionally, you can collaborate with other SSAS holders, pooling resources to fund larger projects that might be out of reach individually.
Meet Tom, a successful property investor who had built up several pension pots over the years through various jobs. After hearing about the benefits of a SSAS, Tom decided to consolidate his existing pensions into a single SSAS pension, giving him more control and flexibility. With a total of £350,000 now available in his SSAS, Tom set his sights on buying commercial property at auction.
Tom spotted a promising retail unit in a growing part of town listed for auction with a guide price of £300,000. The property was in good condition, with a long-term tenant already in place, meaning immediate rental income was on the table.
He did his homework, reviewing the legal pack and assessing the market potential for the area, and decided this was an ideal investment for his SSAS.
On auction day, Tom stayed calm and stuck to his budget, winning the property with a final bid of £320,000. Using his SSAS pension to fund the purchase, Tom was able to complete
the transaction within the 28-day completion period. The rental income from the property now flows directly into his SSAS, growing his pension pot tax-free.
Additionally, as the area continues to develop, Tom is confident the property’s value will rise, offering even greater potential for long-term capital growth.
By using his SSAS to buy the property, Tom avoided taking out traditional finance, saved on interest payments, and created a tax-efficient investment within his pension fund. His old pensions, once locked away in various schemes, have now transformed into a powerful income-generating asset. This means he can grow his retirement savings and property portfolio.
It’s crucial to prepare thoroughly with your SSAS trustee well in advance of the auction. The trustee plays a key role in ensuring that the SSAS complies with HMRC regulations. There will also need to be checks that sufficient funds are available for the property purchase.
Before attending the auction, you’ll need to make sure the trustee has reviewed the legal documentation, approved the investment, and arranged any necessary transfers or loans.
This preparation will ensure you’re ready to act swiftly and confidently on auction day, avoiding any delays that could jeopardise the purchase.
Using a SSAS pension to buy property at auction in the UK offers numerous benefits, from tax efficiency and full investment control to low-cost finance and diversification.
By incorporating a SSAS into your property investment strategy, you can accelerate growth, mitigate risks, and create a lasting legacy for your family.
As long as you are a director of a UK limited company, have some fuel to put into the SSAS and understand how to invest in property, you’re eligible. As SSAS is not right for everyone, and speaking to the experts at WealthBuilders can help you understand more about whether it might work for you.
If you’re ready to take control of your pension and turbocharge your property business, a SSAS could be the perfect vehicle for you. Happy investing!
WealthBuilders is offering you free SSAS resources and a complimentary consultation call to assess whether a SSAS pension could allow you to use your existing pensions or business profit to work harder and smarter for your property goals.
Click here to download your free SSAS resources and book a complimentary consultation call.