Liberty SIPP

• Member Login
• Sign up

Ron McDonald on Liberty’s Flexible approach to SIPPs

The SIPP market has become fragmented. It is largely dominated by insurance companies and investment houses whose objective is to secure funds under their own Management.

This is in contradiction to the basic principles of SIPPs:-

• Unbundle the pension arrangement – separate investment management from administration
• This enables clients to invest in a wide range of asset classes
• If HMRC allow it (without tax penalties) customers should be given the opportunity
• This facility is only available via specialist, flexible trustees

Using SIPPs to finance new companies

“A” day changes (effective from 6/4/06) have enabled sipps to purchase an unrestricted amount of shares in unquoted companies.

• This can be extremely attractive for potential SME’s or existing SME’s looking to provide additional capitalisation is today’s difficult market
• Try going to a bank for a business loan without offering security!
• Can be the difference between establishing a new company or not, especially if you want to control the company
• Can be on an individual basis or a number of directors pooling their pension monies together to provide finance
• Providing the company does not own “taxable property”, HMRC will not impose any tax penalties
• For controlling directors- company must not own any tangible moveable asset over the value of £6000

Solution to Pension Borrowing Restrictions

Registered pension schemes such as a SIPP can only borrow up to 50% of scheme assets to purchase Commercial property.

Take the case of 3 directors who wish to pool their combined pension assets of £500k to purchase business premises in a tax efficient manner, via their SIPPs.
SIPP trustees can borrow £250k – puchase a maximum of £750k!

But property costs £1m.

Answer is joint ownership between the SIPPs and the company.
The amount bank lends to company is unrestricted.

• e.g. property £1m bank will lend £700k
• £250K to SIPPs £250K TO COMPANY
• Rental income will be paid by the company as tenants pro-rata to SIPPs and the company. In the above example 75% to SIPPs and 25% to the company
• Rental income used to finance mortgage payments-any excess can be invested

Jun 16, 2008