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Accessing pension funds

The current Covid 19 crisis has led to us receiving many questions from clients asking whether they can access their pension funds to help alleviate cash flow issues within their businesses. Whilst there are ways in which this can potentially be achievable, this is an area where we cannot highlight enough how important it is to think very carefully before making any decisions.

How can pension funds be accessed? There are three principal options to explore.

SSAS loan backs

A Small Self Administered Scheme (SSAS) is effectively an occupational pension scheme for small business where the members have choice and control over what the pension invests into, similar to a Self Invested Personal Pension (SIPP). A SSAS has one additional investment opportunity available to it that a SIPP does not and that is the ability to make loans back to the sponsoring employer (the pension members’ own trading company). This is a common practice and is often used to help a business obtain access to funding whilst also generating a controlled fixed rate of return for the pension fund. However, there are various criteria that need to be met for a loan to be allowable, in terms of the security and lending terms and the rules surrounding this can make such a facility difficult to obtain.

Pension property purchase

We have seen many scenarios over the years where a business owns its trading premises and, for example, needs funds to expand the business. The directors hold significant sums within their pensions and so have sold the property to their pensions, bringing cash into the business to progress their plans, whilst leaving the pensions with a potentially attractive investment asset. Clearly this brings with it heightened risk as it means one is tying one’s retirement fund to the success of the business. If the business were to fail, this could leave the pension fund with an empty building and the associated costs that come with that.

Accessing tax free monies

If an individual is aged 55 or over, they are able to access their pension funds and, subject to the rules of their particular pension, they maybe be able to access the funds flexibly. This could, for example, involve them drawing from their 25% tax free allowance, whilst leaving the remaining taxable 75% untouched. The individual can then lend those monies to their businesses. Clearly this reduces the value of the pension fund and removes the ability to draw the tax free monies in retirement, both of which could have a negative impact upon their financial well being in retirement.

Each of the above options can provide business with access to much needed liquidity. However, each carries its own specific risks and they all carry the overarching risk of tying one’s retirement fund to the success of the business, at a time when the business could be going through a difficult period. As such, any decisions regarding matters such as this require a lot of thinking and good sound advice. Speak to one of our advisers today, email enquiries@cowgills.co.uk.


The value of investments and income from them may go down. You may not get back the original amount invested. Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means testing benefits is no suitable for everyone. You should seek advice to understand your options at retirement.

Posted by Matthew Bromley
20th May, 2020
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