The sole director and shareholder of an accounting firm was looking to move premises in order to expand the business. He was hoping to use his Small Self-Administered Scheme pension, valued at £140,000, to buy the freehold of a warehouse for £170,000 on which he would then spend £40,000 (via SSAS) converting it into a two-storey office.

His business, the accounting firm, would then lease the building from his SSAS on a Full Repairing and Insuring (FRI) basis.

The director approached us for help in finding a lender that would accept his pension as the borrowing vehicle.

Although tightly regulated, SSASs can make commercial property investments and can borrow up to 50% of the value of a fund, which meant we were looking for finance of £70,000.

We approached a high street bank which we know has experience in this type of transaction.

Rightly, the lender viewed the case as a commercial investment rather than business owner-occupier transaction but because the two parties were linked, the bank agreed to waive the arrangement fee which it normally only offers on owner-occupier deals, thus saving the pension fund £1,050.

Here are the details of the terms offered:

Purchase price: £170,000

Loan amount: £70,000

LTV: 41%

Rate: 5.29% 10 years fixed

Term: 10 years capital & interest

Lender arrangement fee: Nil

Borrower: Client’s SSAS pension

Mortgage payment: £751 pcm

Rental income: £1,333 pcm (from the tenant - client’s accountancy business)

Gross yield: 9.5% pa

Consultant: Paul Keddy, 01732 471655

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.