Pension-led funding on the up

Pension-led funding on the up

There has been a surge in interest for pension-led funding, particularly from businesses which have used alternative forms of financing, according to Anthony Carty.

Clifton Asset Management’s financial planning director said there has been renewed interest in business owners using small self-administered scheme funds to help their business grow.

This has been prompted by the expense of some alternative funding sources and volatile market conditions of late, he explained. “Businesses that have taken funds from alternative sources are coming to us saying they are paying 10 per cent to this platform and my pension is going backwards.

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“When you are thinking about using pension-led funding, if it is right it is the only form of funding where you end up paying interest to yourself and retaining control of your business.

“In the last six to 12 months we have been getting a lot of people wanting to use pension-led funding to take out more expensive forms of borrowing.”

The decision on whether to use an alternative form of funding such pension-led or peer to peer would depend on the circumstances, said Mr Carty.

“At the end of the day we are still talking about someone’s pension. Businesses can fail and if you invest your pension in your business and it fails you can take a loss.”

One of the problems facing this sector, is the lack of regulation surrounding Ssas, he argued.

“The only thing that stems the action of liberators is that each new scheme has to be registered with HMRC and their due diligence has improved considerably.

“I am one who thinks that bringing Ssas in line with Sipps and having them regulated by the FCA would not pose any concerns. Our in-house controls are all built on the presumption that they are regulated anyway.”

As FTAdviser’s Guide to Ssas detailed, providers do not have to contend with capital adequacy changes that are due to take effect for Sipp providers in September.

Ssas is still subject to regulations regarding the provision of risk warnings on drawing benefits, signposting the Pensions Wise service and also the requirement for advice on taking transfers.

Since 1 September 2014, HM Revenue & Customs requires the formal scheme administrator to be ‘fit and proper’.