Where this fits
Get advice before anything is drawn up. The conditions are not negotiable and a loan that misses one is taxed as though you had taken the money.
Sunny Bharj
Independent Financial Adviser
Tony Springer
Independent Financial Adviser
Yes. A small self-administered scheme can lend to the employer that sponsors it, up to 50% of the fund, provided five conditions are all met. A SIPP cannot do this, and no registered scheme can lend to a member.
Measured on cash plus the net market value of the scheme's assets immediately before the loan is made.
Over an asset worth at least the loan plus interest, for the full term.
At least one point above the average base rate of six named banks, rounded up to the nearest quarter point, under regulations that reset the figure monthly.
One roll-over is allowed if anything remains outstanding at the end.
For each complete year. Interest-only repayment fails.
The loan becomes an unauthorised payment. That carries a 40% charge on the member, a further 15% surcharge where unauthorised payments in twelve months reach a quarter of the member's pension rights, and a scheme sanction charge of up to 40% on the scheme administrator.
The conditions are not a matter of interpretation and there is no relief for an honest mistake, so the documentation and the repayment schedule matter as much as the decision to lend.
There is no relief for an honest mistake. Miss one of the five conditions and the whole loan is an unauthorised payment.
No. The loanback rules apply to occupational schemes, which have a sponsoring employer. A SIPP does not, and a loan to a connected employer would be taxed on the member.
No. Loans to a member, or to anyone connected with a member, are not permitted from any registered pension scheme.
Ordinary business purposes. The five conditions govern how the loan is made and repaid. What the company spends it on is its own affair.
No, and it should not be approached that way. It is a commercial loan to the company, secured and repayable with interest, and the money belongs to the pension throughout.
Get advice before anything is drawn up. The conditions are not negotiable and a loan that misses one is taxed as though you had taken the money.
Independent Financial Adviser
Independent Financial Adviser
A first conversation of about twenty minutes, at no cost to you. Tell us what is on your mind: a pension you have lost track of, a fixed rate ending, a will you keep meaning to write.