“Who wants to own their own bank?” That’s how Matic Media founder and MD Richard McCombe pitched an alternative funding method to employees when he wanted to expand. He tells his story…
Anyone who knows me will be aware that I like detail, processes and systems - I don’t like risk. This can be a bit challenging for those around me, but it is my responsibility to safeguard our business and those within it. That leads me into a story… I have a friend who had a commercial printing business that went bust in 2012 and he fell victim to a major bank’s lending and support policies after the 2008 crash. In short, they closed him down. There has been a documentary made about the practices of this bank - it’s not happy watching.
Because of stories like this, I have always been overly cautious about borrowing and in return I may have been the stumbling block to our company’s growth over the years. However, we have always achieved positive levels of success and since the change in direction with our trade only brand Graphic Warehouse, we have seen our business outgrow our current premises and printing and finishing capacity. Sounds great, but we were not able to purchase the building we currently lease, so expansion at our existing location was not possible. We examined our options, and a local building coming onto the market led to the question: ‘How do we fund this?’.
At first, I considered a SIPP pension. A Self-Invested Personal Pension (SIPP) is a type of personal pension plan, available in the UK, that is a tax-efficient savings vehicle designed to help individuals save for their retirement. SIPPs offer more flexibility and control over how your retirement savings are invested compared to other types of pension plans.
In short, as many of you will know, you can use your pension to purchase a building that you could operate your business from. The rent would then be paid into your pension. This offers many tax advantages for an individual - but what I found most interesting were SSAS pensions.
A Small Self-Administered Scheme (SSAS) pension is a type of occupational pension scheme, available in the UK, that is designed for small groups of company directors or key employees of a business, allowing them to take more control over their pension investments and decisions compared to traditional workplace pension schemes.
The story behind SSAS pensions is quite fascinating. I understand they were very popular in the 1980’s but were somewhat abused due to loopholes that allowed parties to extract funds from pensions and avoid tax. HMRC stepped in and ensured that this could no longer happen, and they fell out of fashion.
So, unlike SIPPs that are regulated under the Financial Conduct Authority, SSAS’s are under the eye of HMRC. The process of setting one up is quite laborious and costly, but they offer some very interesting benefits.
SSAS pensions are designed primarily for businesses, particularly small companies, and their directors and employees. They are used as a vehicle for retirement savings and, in some cases, for business-related investments. Unlike retail investment products that are sold to the general public, SSAS pensions are typically established for a specific group of individuals closely related to the sponsoring employer.
My experience has told me that the scheme offers unbelievable flexibility and control of your pension investment fund. For example, you could gather some members of your business who would like to be part of that pension scheme. Those funds could be used to purchase a building or loan funds to the business to invest (there are strict conditions here). Alternatively, you could invest those funds through a fund manager in the way a personal pension would. You could even invest in a different business or other commercial properties - it can be quite flexible.
SSAS pensions come with many legalities and like all investments they have apportioned risk but you’re going make sure your business does not hit the skids or your livelihood is down the pan. I particularly like this because you have control over your returns by the way of interest the fund charges on loans or leases. And on top of this you can offer its benefit to others you think should be part of the SSAS.
If you want to know more about SSAS pensions you need to find a suitably qualified financial advisor with experience in SSAS pensions and expect this to cost you, but I found it worth the investment.
And finally, here is how I pitched it… “Who wants to own their own bank?”