Partner Content: WealthBuilders
Investing in commercial property through a Small Self-Administered Scheme (SSAS) pension is a savvy move for business owners, particularly those in the healthcare sector.
This approach offers a range of benefits, including tax-free rental income and capital growth, while also providing the flexibility to reinvest in your business. In this article, we explore how a SSAS pension can help you achieve these goals, whether you’re investing directly in property or participating in collective investments.
What is a SSAS Pension?
A SSAS pension is a type of occupational pension scheme that is typically set up by small business owners. It offers significant control over how the pension funds are invested, allowing for a range of investment opportunities, including commercial property.
Unlock the Potential of Your Existing Pensions
If you already have existing pensions that aren’t performing as well as you’d hoped, a SSAS pension could be the perfect solution. Many people are unaware that you can transfer funds from personal pensions, SIPPs (Self-Invested Personal Pensions), or other workplace pensions into a SSAS. This allows you to take greater control of those underperforming funds and use them to fuel commercial property investments. By consolidating your pensions into a SSAS, you can unlock that untapped potential, giving your funds the opportunity to grow faster while simultaneously helping your business.
Direct Investment into Commercial Property
One of the most attractive aspects of a SSAS pension is the ability to invest directly in commercial property. For healthcare professionals, this could mean purchasing the premises from which they operate or acquiring additional properties within the healthcare sector. Here’s why this can be a game-changer:
- Tax-Free Rental Income:
When you own commercial property within your SSAS pension, the rental income received is tax-free, growing your wealth faster. For healthcare professionals, this rental income can be substantial, particularly in high-demand locations. - Capital Growth:
Commercial property can be a strong long-term investment, with the potential for significant capital growth. As property values increase, so does the value of your SSAS pension. This growth is tax-free within the pension, further enhancing your retirement savings. - Releasing Capital for Your Business:
If you already own your business premises, you can sell it to your SSAS pension and release capital back into your business. This can provide much-needed funds for expansion, new equipment, or other investments, all while still retaining use of the property through a leaseback arrangement. - Tax Efficiency:
A SSAS pension allows you to make your business affairs more tax-efficient. By investing in property through your SSAS, you can reduce your taxable profits, as rental payments made by your business to the SSAS are considered a legitimate business expense meaning you’d now be paying rent to your own pension. This can lower your corporation tax bill, providing a double benefit.
Passive Investment in Collective Schemes
Not everyone wants the responsibility of managing a property directly, and this is where collective investment opportunities come into play. With a SSAS pension, you can also invest passively in a fund or a group investment scheme focused on the healthcare commercial property market. Here’s how:
- Diversification:
Collective investments allow you to spread your risk across multiple properties and even different types of properties within the healthcare sector. This diversification can lead to more stable returns and less exposure to the risks associated with owning a single property. - Professional Management:
By investing in a collective scheme, you benefit from professional management. The fund managers will handle the day-to-day operations, tenant relationships, and property maintenance, freeing you from these responsibilities. You get the benefit of property investment without the hassle. - Access to Prime Opportunities:
Collective investments often give you access to property deals that might be out of reach for individual investors. This means you can invest in high-value, high-demand properties that offer strong returns, something that might not be possible with a direct investment approach. - Steady Income Stream:
As with direct property investment, the income generated within a collective investment scheme is paid back into your SSAS pension. This income is usually distributed regularly, providing a steady stream of tax-free income to boost your retirement savings.
Case-Study: Consolidating Pensions to Purchase a Building for a Dental Practice
Let’s take a look at how Dr. Sarah, a dentist, used her SSAS pension to supercharge her business and retirement plans.
Dr. Sarah’s Situation:
Sarah had several pension pots from previous employments and personal pension plans, totalling £400,000. These pensions had been underperforming, and she wasn’t seeing the growth she had hoped for. At the same time, Sarah wanted to purchase the building where her dental practice was located, as she was tired of paying rent to a third-party landlord.
- Step 1: Consolidating Pensions into a SSAS
After speaking to a SSAS specialist, Sarah decided to set up a SSAS for her business. She transferred her existing pensions into the SSAS, giving her the control and flexibility she needed to make smarter investment decisions. With £400,000 now sitting in her SSAS, Sarah had the capital ready to invest in her business. - Step 2: Purchasing the Dental Practice Building
Sarah found that the owner of the commercial property her practice was based in was prepared to sell her the building for £350,000. Using the funds in her SSAS, she purchased the building outright, with the SSAS owning the property. This meant that Sarah’s practice no longer had to pay rent to an external landlord. - Step 3: Paying Rent to the SSAS and Saving Tax
However, the practice still paid rent, but now it was to Sarah’s SSAS. This rent was a legitimate business expense, allowing her to reduce the practice’s taxable profits, saving corporation tax each year. The rent Sarah’s business paid – £28,500 per annum – went directly into her SSAS, growing her pension pot tax-free. As a result, Sarah was both saving money on taxes and building her pension without being taxed on the rental income. - Step 4: Long-Term Benefits
Not only did Sarah stop paying rent to someone else, but she also benefited from the capital growth of the property over time. As the value of the building increased, so did the value of her SSAS pension. Sarah’s smart move allowed her to turn her business expenses into a tax-efficient way to boost her retirement savings.
By consolidating her underperforming pensions into a SSAS and investing in property, Sarah transformed both her business and her pension future.
This case-study highlights the power of using a SSAS to take control of your pensions and invest in commercial property, making your business more tax-efficient and your pension more robust.
Conclusion
Using a SSAS pension to invest in commercial property within the healthcare sector offers a range of compelling benefits. Whether you choose to invest directly in property or opt for a passive investment in a collective scheme, the potential for tax-free rental income, capital growth, and enhanced tax efficiency can significantly bolster your financial future. For those looking to make their business more efficient and secure their retirement, exploring SSAS pension investments in this space is a step worth considering.
Unlock the potential of your SSAS pension today and build a stronger financial legacy for tomorrow.
Setting up a SSAS pension is not for everyone, and if you’d like to understand whether this could work for you, speak to the experts at WealthBuilders.
