Stephen McPhillips: Utilising self-invested pensions during lockdown

As the world deals with the human and economic disaster that is Covid-19, Stephen McPhillips looks at how SIPP and SSAS could help business owners weather the storm

It’s difficult to begin any article at the current time without acknowledging the devastating effects of the coronavirus global pandemic.

Readers will be only too aware of its effects on their daily lives and business owners will be acutely aware of the impacts it is having on their sectors and businesses. While some sectors and businesses may actually be benefitting from the crisis, many are not so fortunate and may be struggling to survive – certainly in their current form.

Where can help be found?

Aside from the unprecedented levels of state support on offer from the UK government, advisers and clients might wish to consider other channels open to them in these uncharted waters.

Self-invested pensions such as self-invested personal pensions (SIPPs) and small self-administered schemes (SSAS) might prove a useful and much needed tool in navigating a way through very difficult times.

How can SIPP and SSAS help in times of crisis?

Asset purchase from member / connected business

Readers who are familiar with SIPP and SSAS will be aware of the very wide range of possible investments that can be available within these types of arrangements.

Suitably structured bespoke SIPP and SSAS can offer a lifeline to businesses and individuals, in the right circumstances, because of the diverse range of assets that can be potentially acquired within them.

Those assets can include commercial property, loans to employers (under SSAS), loans to unconnected parties and unquoted shares. Any of these could represent an opportunity in times of crisis.

For example, if the vendor of the asset is the client as an individual, or the client’s business, then the vendor will receive cash from the SIPP or SSAS as purchaser.

That cash might indeed represent a lifeline, although it should be noted that the asset being acquired by the SIPP or SSAS must be professionally valued and the underlying investment should be commercial and in the interests of the pension scheme member(s).

Responsible providers will naturally consider these as part of their asset acceptance processes.

The cash received could be used to assist with cash flow and for business continuity purposes, amongst other things. In times of suspended funds and depressed fund values, it is not necessary for the SIPP or SSAS to acquire a commercial property in its entirety – provided that the provider has the skills and experience to handle the nuances of part / joint purchase situations.


As noted above, a suitably structured SSAS can lend monies to an employer which participates in the scheme. That loan has to take place on terms laid down by HM Revenue & Customs (in order to avoid an unauthorised payment arising), but the loan might represent a previously untapped source of funding for the client’s business.

In return for making the loan, the SSAS receives a commercial rate of interest and a structured repayment schedule which could help with lifetime cash flow forecasting for the SSAS members. Given that the loan should be secured by a First Legal Charge, there should be some certainty of repayment in the event of default by the borrower.

While loans to employers can help both the connected businesses and the SSAS, loans to unconnected companies (by both SSAS and bespoke SIPP) can also be an attractive investment for the scheme to make and they can represent an alternative source of finance for businesses seeking, for example, to expand to meet demand within their sector during the crisis.

Take, for example, a supplier of healthcare products that has a full order book but cannot fulfil the orders without cash flow with which to purchase raw materials.

With some careful planning and, perhaps, lateral thinking, a number of opportunities present themselves during times of crisis and SIPP / SSAS are well-placed to provide the necessary vehicle for financial planners and clients to take advantage of them.

Stephen McPhillips is technical sales director at Dentons Pension Management