Engineering Company in Sheffield.
Need: £100,000+ to remove overdraft and remove Personal Guarantees and Bank Debenture.
Solution: After careful research into needs and expectations decided on a Small Self Administered Scheme (SSAS). Combining the two Directors pension schemes gave a net scheme value within the SSAS of £250,000. As a SSAS can make a loan of 50% of scheme assets to the sponsoring employer the SSAS provided £125,000 in new funds to the company, repayable over 5 years at 6% giving the scheme a return on the “investment”. Balance in the SSAS, loan repayments and contributions all onwardly invested to maximise returns.
- Personal guarantees removed as overdraft repaid in full.
- Bank debenture replaced with charge over company assets by the Director’s pension scheme.
- Gave the company an ”extra” £25,000 in new funding.
- Directors pension scheme receives a return of 6% on the cash in the business instead of the bank.
- Company can return to the scheme and ask for a new loan and providing all HMRC rules are followed the pension scheme (unlike the bank) cannot say “no”.
Manufacturer in Cumbria.
Need: £150,000 in total. £75,000 from the bank and £75,000 from personal funds.
Solution: Working with the bank, , the Directors opened a pension scheme which provided £75,000 from the Director’s pension fund as a loan into the company. The bank then matched this funding providing the rest of the required capital enabling the company to grow from a turnover of £150,000 when the money was provided to a turnover in excess of £10 million within 5 years. During this time we also introduced the Directors to investors who provided a further £3 million in funds to further increase turnover and profit.
- Matched funding reassured the bank that the Directors were willing to provide half the capital needed and cleared the way for the bank to provide the other half.
- Pension scheme benefitted from the return on the capital employed at a rate (in this case) of 5.5%.
- Increasing profitability meant that the Directors could build their pension scheme rapidly with contributions giving them the ability both to reduce their Corporation Tax bill and provide a “strategic reserve” in a creditor protected environment if further funds are needed in the future.
Electrical Wholesaler in Rotherham.
Needs: Company had outgrown their leased premises and wished to purchase a brand new industrial unit valued at £300,000 for their business. The problem was that there was little spare capital in the company as expansion meant that all cash flow was keeping up with the growth.
Solution: A strategy was devised that meant that by amalgamating the directors pension funds of £275,000, a mortgage was raised within the scheme of £100,000 (a pension scheme can borrow up to 50% of scheme assets – in this case maximum would be £137,500) giving the pension scheme the £300,000 required to purchase the property within the pension scheme. The pension scheme then provided the capital to add a mezzanine floor to the building.
- Rent of £21,000pa (7% return) received into the Directors pension scheme. This income used to pay the mortgage.
- Property now held in a creditor protected environment.
- When the Directors decide to sell the property all proceeds will be received into the scheme free of Capital Gains Tax. Alternatively, property could remain in scheme and can be rented out to a third party.
- Surplus funds are invested giving the scheme a return and enabling the company to receive loans into the company going forward.
Plumbing Supply Company in Birmingham.
Need: Company had a current SSAS pension scheme, but were not happy with both the charges and level of service provided by their current professional trustee or their adviser.
Solution: Transfer of the SSAS to a new Trustee and advice function taken over.
- New SSAS trustee provided better service and reduced the annual cost by 60%.
- Sulis Wealth took over as scheme adviser with the added benefit of reducing the adviser charges by 50%.
- Pension scheme benefitted with much lower charges and scheme members provided with excellent, value for money advice.