Pension-Led Funding Using Sale And Leaseback

Pension-Led Funding Through Sale And Leaseback Can Pay Huge Dividends For Your Business


As the 'sale and leaseback' method of pension-led funding is arguably the most interesting, and often the most effective, the following questions and answers will provide you with a little more detail. 

Is 'Sale And Leaseback' Available To All Businesses?

The simple answer is 'yes'.  However, the only specific limitation is the amount of money in the pension fund.  Because of the associated costs, it's not generally viable where available accumulated funds are below £50,000. 

How Does 'Sale And Leaseback' Work?

A detailed assessment of company accounts, track record, business plan and funding structure is carried out by a pension specialist.  Assuming strong and sustainable business foundations have been established, if intellectual property is being used as an asset to secure the funding, an independent specialist valuer will be commissioned.  Once the value has been established, the SIPP agrees to buy some or all of the assets from the business. The SIPP sets up a bank account and releases the agreed sum to the company.  In return, it makes lease payments back to the SIPP, usually on a monthly basis over five years. The whole process takes between three and eight weeks.

What Are The Key Points To Consider?

Renewing the facility

Whilst all business carries an element of risk, in the current economic environment, one of the biggest problems facing many businesses is the banks' lack of enthusiasm for lending. Funding your business through 'sale and leaseback' reduces and can remove this risk entirely as it does not require a third party to approve or renew the facility. Not only does it leave all your other borrowing facilities in tact, it provides genuine stability and control for you, the business owner.  Put another way, unlike your bank, your SIPP is unlikely to 'call in' your business funding!

It's Similar To Commercial Lending

The risks associated with 'sale and leaseback' are comparable to traditional commercial lending. The decision to proceed will be based on the viability of the underlying business and its ability to service its financial responsibilities, just like commercial lending.  But with 'sale and leaseback', you're in control.

Defaulting On The Lease Payments

Although protected from external creditors, if your business defaults, your SIPP may suffer a loss and in the worse case, it might have to be written off. It's not just your business that will have suffered, your retirement will look more bleak too.  However, compare that to traditional funding methods where not only could you be liable to pay back the loan, your other assets such as your home may also be at risk if you've given personal and director guarantees.

Find Out If Pension-Led Funding Could Help Your Business

If you're interested in using the money in your pension fund to support or grow your business, please get in touch using our contact form.

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from  Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.

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