Loans

Loans can be made to sponsoring companies of the pension scheme or to genuine third party companies or individuals. If made to a company, they must be trading companies and the loan must be for trading purposes. Loans cannot be made to scheme members, their relatives or connected parties; companies controlled by scheme members, their relatives and business associates not participating in the pension scheme and partnerships in which scheme members and/or their relatives are partners.

It is important to note the following requirements concerning pension scheme loans made to sponsoring employers of a SSAS:

• The maximum amount which may be lent by a pension scheme is 50% of the net market value of the pension fund less any outstanding loans which have previously been made.
• The pension scheme must charge interest on the loan of at least 1% above the average of the base lending rates of 6 high street banks. The average is rounded up to the nearest 0.25%.
• The maximum term of a loan is five years.
• A loan must be repaid in equal instalments of capital together with interest on at least an annual basis.
• A loan must be secured throughout its full term by the pension scheme having a first legal charge over an asset owned by the borrowing company or some other person, which is of at least equal value to the loan capital and interest payments due during its term. The asset used for security must not be a "taxable investment" (such as residential property) which would lead to heavy tax charges on the pension scheme should it invoke the legal charge.