Loans to the Company

Position Prior to 6th April 2006

Prior to 6th April 2006 a SSAS was permitted to make a loan to a Principal or Associated Employer of the scheme. Loans from SIPPS were not permitted.

Position From 6th April 2006

From 6th April 2006 any registered pension scheme is permitted to make a loan to:

• An unconnected third party – individual or corporate
• The sponsoring employer – occupational schemes (SSAS) only

Loans to members, people or other entities connected to members are unauthorised payments and will be taxed accordingly.

Amount of Loan

The maximum amount of the loan is 50% of the net scheme assets. That is 50% of the assets, less any scheme borrowings. 

Any existing loans need to be taken into account.

Terms of Loan

Loans must be on a strictly arms length commercial basis. In order for Her Majesty Revenue & Customs (HMRC) to be satisfied that this is the case they must meet the following criteria:

• The capital must be secured by a first charge on assets equal in value to the outstanding capital and interest
• The interest must be at least 1% over the average base rate of the 6 leading banks
• There must be regular capital & interest repayments – at least annually
• The maximum term is 5 years
• This term may be rolled over only once

Existing Pre A Day Loans

The pre A Day criteria for loans to employers were much less stringent. Loans granted prior to 6th April 2006 may continue on the existing terms until the repayment date providing there are no changes to the repayment terms.  Any restructuring of existing loans must take place under the terms of the new rules.

Registered Address: 1 & 2 St Matthews Business Centre, Gower Street, Leicester LE1 3LJ
Registered in England & Wales No. 02562924
Westerby Trustee Services Ltd is Authorised and Regulated by the Financial Services Authority Reg. No. 463533