Property Financing: Pension Finance – From an ‘Oh sh*t moment’ an untapped resource of pension-funded property investments | S3E10

You know how some words are an instant turn-off in a conversation right? Well, today might just flip one of those words on its head I can tell you. Regulation, insurance and pensions are quite possibly three words that would send many of us to sleep or straight off to Rightmove anyway. However, stick with us today and you might just have a different perspective of these three words, as together they can form the basis of a property investment fund that you thought you didn’t have. Or as my guest today, Neil Ryder from My Goal Is would say, a massive untapped resource.

Resources mentioned

To see the video FAQs on using your pension for property (and other investment) purposes, visit My Goal Is or contact Neil Ryder from My Goal Is on 01793 858215 or via his website and remember if you  mention The Property Voice to him, Neil promised me after recording that he will also send you a free copy of his forthcoming book as well.

Richard & Damien’s 360° Property Business Workshop or drop me an email to be added to the wait list for our next event instead, podcast@thepropertyvoice.net

Link to the Podcast feedback survey

Today’s must do’s

Follow Neil’s one-step process and contact your pension provider to request the current transfer value and release forms. Then tot up the totals…if you have something like £160k or more, then with a pension buddy or on your own you may be able to access a previously untapped resource for your property investing fund. Reach out to Neil, or drop me a line of you want me to try and help to match you up to someone in a similar position.

If you already have a fund or SSAS…then we really should talk about getting you a return on your fund J

Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!

Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!

Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series

Get talking!

Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net

Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page

Transcription of the show

Hello, and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.

You know how some words are an instant turn-off in a conversation? Well, today might just flip one of those words on its head I can tell you. Regulation, insurance and pensions are quite possibly three words that could send many of us to sleep or straight into Rightmove at least. However, stick with us today and you might just have a different perspective of these three words, as together they can form the basis of a property investment fund that you thought you didn’t have. Or as my guest today, Neil Ryder from My Goal Is would say, a massive untapped resource.

Let’s hear how we can make our pension work for us in all types of property strategy, including residential property, right now and not in a time far, far away.

Here we go…let’s hear what Neil has to say on the matter.

Richard: Hello everybody, once again, thanks for joining me again this week, I’m very pleased to have yet another, fantastic guest. I have been in contact with Neil Ryder. First of all, Neil, hi, how are you?

Neil: Hi, how are you? I’m fine thanks.

Richard: Excellent, thanks for joining me today. Our engagement if you like, started about a year ago, and finally managed to get you on the podcast, I’m really glad. But, I also wanted to make sure I got you on at a relevant point in time, from when I first heard you. Yeah, because you are going to be telling us all about untapped resources. Label it, property finance using a pension, I know we are going to have a discussion around that. We are in the middle of a series, we are talking about alternative and creative ways of financing in property, and this very much a topic they are not very much aware of, and even if they are they think there is too many restrictions, it’s too difficult or whatever. And, maybe you can put the record straight.

Neil: Well I hope so!

Richard: Brilliant. Well, what I think would be a great way to start; we normally do with guests on the podcast is just ask them to give a brief introduction, a bit of background about yourself and in particular about the area you have come to talk to us about today. So, over to you now.

Neil: Ok, my name is Neil Ryder, I’m 64 in two weeks’ time, married, two children, one grandson, and I got involved in this work with pensions around 2010. I have followed the real strong principal that is indoctrinated into all of us of; get a good education, get a good job, with a good pension, you are set for life. Well in 2010, we faced what we now call our ‘Oh Shit’ moment, when we realised that the pensions that we had were not really going to give us what we needed moving forward. And in 2010, I decided to take control of my own financial future. And I wanted to take a pension and turn it from this situation where if it is invested in stocks and shares, where it just goes up and down on a regular basis and invest it into things that were going to produce a known return at a known rate. And, since 2010, we have been through various iterations of this. So, we started off by looking at a SIPP, and then we discovered how you could use a SSAS, then all the of the benefits you can get of using a SSAS, where—a SSAS is a Self-Administered Scheme, where you as a trustee, can determine the investment strategy for your own fund. And, in 2014, working with another colleague, we spent the whole of the year, working with HMRC to get a SSAS model, pre-approved. So, that when we make a SSAS application, when a client makes a SSAS application, it goes through what’s called a Fast Track Approval. So, we can get the SSAS approved very, very quickly, using pre-templated programme. So, they know, HMRC know what they are looking at, they know what the investment strategy is going to be. Now, in the past months, getting SSASs approval has taken quite a while. And I have always said to clients, look I’d hate to see slow-track, if we are on Fast Track, then what’s slow-track like. But, in recent months, we are now getting down to the point where, we are now getting new SSASs in about a 6-8 week period. Which is pretty good, from an HMRC point of view. I’m not an IFA, I’m not regulated by the Financial Conduct Authority, so, there’s a warning for you. And what you have to realise is that, SSAS as a product, is a pension product, is not regulated by the Financial Conduct Authority. And so, in terms of providing guidance as opposed to advice, I can quite happily do that, but, because it is not a regulated product, it’s very, very much down to the individual to move forward, based on the due diligence that they take themselves. So, that the background really.

Richard: Ok, brilliant. Interesting. And, there is a number of things that have already come out but I’m sure we will get into the detail as we go forward. So, thanks for the intro Neil. I guess, pensions—one of the reasons by the way I got you on, is you can make a dull subject, sound quite interesting. There is a compliment to begin with. But, when we talk about the subject of pensions, and then we try and tie it together with property investing, as a potential avenue, particularly from a financing point of view, not many people will be aware that they can use that as a resource. And, even if they are aware, they will think it is too hard, too complicated, you kind of alluded to…it can take too long, you get into the whole advisory piece etc. Could you maybe just take us through that a little bit? Particularly how you see it and how we could use pensions effectively as part of our overall financing solutions.

Neil: Ok, I think, first of all what we need to do is, we need to understand what a pension is. Ok, if we deal with this in its literal sense, a pension fund is purely a tax efficient vehicle to collect money. So that’s what the pension bit is, and as a tax efficient vehicle, it’s a trust fund. It’s managed by trustees, so if you take a standard personal pension, then you may go to one of the big providers, it might be Aviva, it might be Scottish Widows, somebody like that. And all they are providing is this wrapper, this trust wrapper, that you can put money into, or your employer can put money into, in a tax efficient way. Now, its managed by trustees, so, the trustees then, are appointed by the company. So, it might be, Legal & General, they are appointed to every few…they appoint the trustees. And then the trustees, have the ability to invest that money, to make money. And that’s what they do. But, the investment bit, that sits behind it, is technically not part of the pension, it’s a separate provision that the particular provider makes. And if you move to a SIPP—a Self-Invested Personal Pension, you then have to work with a pension provider, again, or a SIPP provider, and that SIPP provider then becomes a trustee. And, that master trustee, then, has a list of pre-approved investments, and providing what you want to do is on that list, then that trustee will invest that money for you. And that the self-investing bit. But if we move to a SSAS, then the SSAS holder—me, you, whoever sets up the SSAS, is the trustee. And within limits, they can invest that money…there is certain constraints that are imposed by HMRC, because with a SSAS, the SSAS is regulated by HMRC, not FCA. So, within certain guidelines, you as a trustee, can invest that money into anything that you want to invest into. Now, we know that a pension fund, under HMRC regulations, cannot invest directly into residential property. In saying that, you can, but it creates a taxable event. You can use your pension fund to invest into a residential property but you are going to pay a tax penalty, you are going to pay 55% tax on that investment. Same as if you invested into gold, if you invested into vintage motor vehicles, its exactly the same. Now, I think we also recognise, that say something like a SSAS, could invest into a commercial property, that’s allowed. But, our approach, the SSAS model that we have developed, isn’t about holding property inside the SSAS, it’s about creating funds, that you can use outside of the pension fund, outside of the SSAS, that you can then use freely to invest in whatever you want. So, if you want to invest into residential property, you can do it. Because, we are not holding the property investment, itself, inside the pension fund.

Richard: So, you create some sort of separate fund?

Neil: We use the vehicle called…we create a Special Purpose Vehicle and we do what’s called a Preference Share Issue. So, from the fund itself, we buy, the pension fund buys shares in the SPV, and the SPV then gets money for those shares. And then, they can invest in what they want.

Richard: Even if the SPV, then itself, invests into property of some description, let’s say its residential, because we know we can’t do it directly. So, even if that SPV was to go and buy a Buy to Let property, residential, that would be permitted, would it?

Neil: Yes, it would. I mean, the SPV itself, cannot directly invest in property. This becomes your Property Management company.

Richard: Ah, right. Ok.

Neil: Right? But then it can lend money to another company which can do what it wants.

Richard: Yeah…

Neil: There are certain conditions around this, in terms of saying that if we create an SPV and we do a Preference Share Issue, then the directors of the SPV have to provide personal guarantees, they also have to take out Key Man Life Insurance, the company has to take out Key Man Life Insurance, and they have to…and because it’s a Preference Share Issue, there has to be a dividend payment, an annual dividend payment from the profits of this SPV back into the pension scheme. But at the end of the day, you are paying yourself. It’s a great way of circulating money round, and growing the pension pot. So, you may at a later date, be able to do another Preference Share Issue, to increase the amount of money that you are using, outside of the pension scheme.

Richard: Well, you probably picked up some of this already but I was just going to ask, how would it work in general terms, I think you have outlined it there, unless we have missed anything. So, you create a SSAS with your pension, then you create a fund with an SPV…

Neil: The basic process, is that, providing there is a Limited Company sitting there, because…a SSAS is an occupational pension scheme, so it has to be associated with a Limited Company. Now, a Limited Company can be set up, as long as it is registered for Corporation Tax and it has what’s called a UTR, a Unique Tax Reference number, and its registered for PAYE, HMRC then view that as a trading company. So, we then can make, or the individual can make an application, to set up a SSAS, ok? And then that SSAS—now the best way to make these work, is for there to be no more than 2 members in that SSAS. Ok, and what we are looking for is a pot, that needs to be a minimum of about £160000 between two people. And at that particular point, it starts to make it worthwhile. Now, if somebody has a smaller pot, and really, once a pot gets below about £100-£110000, it doesn’t work. So, there is a little bit of a limitation, in terms of making it work. But if you think about, if you have worked, say, in the corporate world, and you have spent 15-20 years working for 2 or 3 organisations, when you actually ask for the transfer values of these frozen pensions, they very, very quickly add up. I mean, I had a client in this morning, I got a text message before she arrived and said, I have had the transfer value through, I can’t believe it. And she worked part time for a company, for not that long a period of time. But this was, she is just coming up to late forties and she has got a transfer value on her pension, she has got 2 pensions, and the total transfer value on those 2 pensions, is £126000. So, now we are starting to look at something that is worthwhile. It doesn’t give us everything that we want, but if we are prepared, to leave that pension money say, for 2 years, to let it grow, and it will then almost double in value, then we have got a really good pot that starts to make using Preference Share Issues of raising, or creating a £100000 investment pot, that we could then use for our property, makes it very, very worthwhile and very, very easy to move forward. So, you have to look at this in terms of different strategies. There is no one strategy that orks for everybody, so you need to take into account, what sort of size transfer funds they have got, what sort of age they are, what their aspirations are. And if we sit down and work these through, and I see our role at My Goal Is, is very, very much about helping people to determine what their financial strategy is, going forward. So, we look at what the investment strategy needs to be, to get the pension to the point, where it delivers their property aspirations.

Richard: Understood. We will talk about some potential property projects in a second, but just to go back a little bit there…so, just to clarify for everyone listening in, the SSAS, the Small Self-Administered Scheme, as a wrapper, you would transfer in, existing pension funds into that SSAS, and I guess, it would be linked to Limited Company. So, there’s all the payroll, so it’s a legitimate company pension effectively?

Neil: And if you think about it Richard, the way that the property investment is changing now, a lot of our property investors are moving towards, having a Limited Company in the background anyway.

Richard: Or maybe more than one, yeah, that’s where I was going. You can have a trading company…

Neil: So, if you have got more than one, you have already got the structure in place, to link one, for one to be the sponsor of the SSAS, and for another Limited Company to actually be the SPV that we use for the Preference Share Issue.

Richard: And, one of the other things I was just going to make, it might be a statement of the obvious, but I guess you can top up payments into the SSAS?

Neil: Yes…

Richard: There we go…

Neil: Oh, yes you can. This is a very, very interesting process, because it’s an occupational pension scheme, and if you have a Limited Company, and lets just assume you have head a very successful year, and you have made too much profit, then that company can make a pension contribution, into the SSAS, which reduces the amount of profit that it’s made, and consequently the amount of Corporation Tax that it pays. Now, with pension contributions, there is a limit, as to what you can pay in any one year. And you are limited to; your gross earnings, and that can be made up of your salary, dividend payments, interest payments, or £40000. It’s the lower of, so, it’s the lower of your gross income, or £40000. So, if you don’t earn £40000, if you only earn £30000, then you can only make a pension contribution of £30000. If your gross income is £50, £60, £70000, you are limited to a maximum payment of £40000.

Richard: Good illustration.

Neil: But, you can back pay up to 3 years. So, as long as you have had a pension…if you have got a frozen pension that is sitting somewhere, and you have not made any contributions into that, as long as there is a pension scheme that existed over that 3-year period, you can back pay up to 3 years.

Richard: And, is there a tax benefit of doing that as well?

Neil: Well, it’s reduced the amount of Corporation Tax that you have paid, and it’s now sitting in your pension fund and that going to increase the amount of money we can…the value of the fund. And what is available as a Preference Share Issue. We can take out, up to 65% of the pension fund value, as a Preference Share Issue.

Richard: So, now we are getting interesting, because we are now going to say, what are we going to do with that 65% Preference Share Issue, that we can do great things in property, what sort of projects, do you think, are then suitable if we then look at property strategies?

Neil: What do you want to do with it? Do you want to do a JV? Do you want to be a silent JV partner? So, nothing to stop you then lending that to an unconnected third party at an interest rate that you determine. If you want to use it as a deposit for an HMO, well you can use for a deposit for an HMO. The only thing you have got to bear in mind, is that the company we have done the Preference Share Issue through, has to make some profit, because it has to pay a minimum dividend of 7% back into the pension scheme each year.

Richard: Yeah, so…

Neil: And that’s the only restriction. So, in terms of projects, the money is now sitting outside the pension scheme. And is not subject to any restrictions. You could, there is nothing to stop you going down the road tomorrow and spending it all on scratch cards. But what we would say, is you have got to bear in mind, that at some point that money has got to go back into the company. So, that’s why we turn round and say, right if we are going to do a Preference Share Issue, we want personal guarantees from the directors, we want Key Man Life Insurance, so, you know if this money is invested outside the scheme, if anything happens to the director of the company, then the life insurance pays back into the SPV, that money then is available to go back into the pension scheme and for the shares to be returned to the SPV. And any investments that have been, still continue. They don’t have to be sold back into the pension scheme. So, what it’s doing Richard, is its creating a very secure vehicle for ongoing investment. And when you think about it, as a property investor, we make property investments for our own needs and also for the needs and requirements of our family. Now, what I don’t want to do, is in the event of a death, I don’t want to go back…if you and I were working together, I don’t to have to go back to your wife and say, you know all those investments Richard made that gives you the income and the lifestyle you have got at the moment, well could you sell them so we can put the money back into the pension scheme. What we are creating, is a situation where by all of those investments that are outside or protected, the Life Insurance is putting the money back in the company and that money now has gone back into the pension scheme, and your wife is now going to inherit, free of Inheritance Tax, the full value of the pot, that’s sitting behind that pension scheme. So, it’s a bit like double bubble.

Richard: Yes, I can see that. So, you get the money back in the fund, but you also keep the assets of all, the assets that the fund acquired.

Neil: And something that when we work with a client, is instilled into them, all the way down the line, is that you protect the capital at all costs. Right, you never spend the capital, you invest the capital and you live of the income that the capital generates.

Richard: Ok, so, just to clarify then…

Neil: You always have to bear in mind that the capital, at some point, has to go back into the pension scheme.

Richard: So, just to clarify one point then…you can say they can do anything, so you could actually have a trading strategy, you know buy and sell property, using that fund as possible. You could do conversions, you can do anything basically, is the point.

Neil: You can do anything with it. And its creating the value in the fund, initially, that enables you to take the value of the Preference Share Issue, that meets your aspirations, as far as property development, your property strategy, is concerned.

Richard: So, can I just ask, one point of detail, or technical point if I can? The SSAS, so if I wanted to set up a SSAS, do I need to have some kind of qualification status, like a net wealth, sophisticated investor, anything like that?

Neil: Not really no. The scheme itself is the entity. It helps, if your understanding of things…if you are an experienced property investor, then it makes a big difference in terms of understanding the way investments work.

Richard: Indeed, ok. It helps, but it’s not essential.

Neil: There is no real qualification. The only real qualification is, that there must be this Limited Company, that sponsors the setting up of the SSAS. Now, I think it’s also important to point out, that the Limited Company and the SSAS, have no legal link. They are separate legal entity, so, if anything should happen to the Limited Company, let’s say the Limited Company goes bust. The creditor of the Limited Company, cannot go after the content of the SSAS. It’s a separate legal entity.

Richard: So, we have gone through the how, and some of the structure and that sort of thing. So, I’m going to ask you, it’s probably a bit of a dumb question, because I know what you are going to say. Does this represent a big opportunity right now, for property investors?

Neil: It is a massive opportunity. If you think that the UK…the value of UK Penson Funds is in excess of £2-trillion, and it’s the second largest amount in the world. It moved into that position about 12 months ago, America has the largest pension funds, Japan was always the second largest. And in 2015, our pension funds grew to be bigger than the Japanese pension funds. So, we are now the second largest holder of pension funds in the world. And, the pension freedoms, came into play in 2015. And, that allowed over 55s to actually withdraw funds from their pension pots and do what they want with it. And a number of property investors have done that. But, they have paid a tax penalty, by taking that money out. Now, since 2015, about £3 billion has been withdrawn from this £2-trillion pot. And to put that into perspective, that is only 0.5% of the total UK pension fund value. And a lot of people don’t value pensions, because they can’t touch them; I can’t touch it till I’m 55. And, what they tend to only see, is the value of the pension that it might provide. So, my client that came in this morning, she has a pot of £126000, that’s going to give her a current value, of just over £4000 a year as a pension. And that’s not a lot of money, and we don’t value it. What we have got to do, is value the pot that sits behind. We have got to look at the value that is actually going to fund that pension, and we have got to take control of that so, that pension pot that she is going to bring over, of around £126000, at this point doesn’t allow us to do a Preference Share Issue. But, if we invest that money for 2-3 years and quite typically, and this is the bit where, sometimes peoples’ or my creditability, is stretched or not always believed, because they say, look this is too good to be true. But, our pension funds, our SSASs are growing by around 20% per annum. So, what that means, that in 3-3 and a half years, the actual value of the fund doubles in value. So, £126000, becomes £250000 in 2-3 years. Now, we are talking about having some real money that we can do a Preference Share issue on. And on a fund of around £25000 we could be looking at a Preference Share Issue, of around £100000.

Richard: Oh, I see, yeah, because of the 65% thing. Yeah.

Neil: Because of the 65% rule. So, you know, it’s up to 65%. We have got another client that we are working with, a husband and wife, they are at the point where they could withdraw their pension at the moment. And when they looked at the pensions they were going to get, they were going to get pensions of £14-15000 per year. And, when we pointed out to them that there was a fund that sat behind this and they ought to get it valued. There was a look of, what do you mean there is a fund that sits behind it, surely, if we are being paid from the pension contributions that current people are making into this. No, that’s only in government schemes, government pension schemes are Ponzi schemes, and what we mean by that is, the people that are being paid out, are being paid from the contributions that people are making currently. So, if you are a Civil Servant, you are in the Armed Forces, you work for the Emergency Services, then there is no pot that sits behind your pension, and you can’t transfer that money. You are not allowed to transfer it. But, when they went and got their pension valuations, between the two of them, they were sitting on funds of £1.2 million. So, then we are talking about, what do you actually want to do with it, what are you looking to do in property? But, you don’t necessarily have to use the money to invest in property, you can invest in what you want, providing you protect the capital.

Richard: Indeed. So, let’s just talk Neil. That was a fascinating story, £14000 odd, projected pension, actually was £1.2 million as a fund, between the two of them. It’s fascinating. So, people don’t really look at it that way. But, it kind of takes us into, the next thing I wanted to really ask you. What are the benefits, why would people do this?

Neil: Well, I think there is potentially, 3 reasons why you would do this. One, is if you don’t want to do property investment and you just want a pension fund to grow. I mean, there are a lot of people with quite small funds, and they know, that fund is not going to give them what they want. But, maybe they are not prepared to risk that money, because there is always an element of risk, in terms of saying, well I will use it for property investment. I just want it grow. But we can provide—because you are the trustee, there is no middlemen. So, if you are working with a commercial provider of a pension, they have got overheads to pay, they have got bonuses to pay, and most of them are proper Limited Companies. And their loyalty is to their shareholders. So, they will pay the shareholders first, before they will make contributions and give you growth on your pension pot. So, one reason that you should do it, is you are the Trustee, there are no middlemen. And the cost associated with a SSAS are incredibly low. They are amazingly low. You are going to get great growth on those schemes. We use, the investments that we use are…the bit that you leave in there, or if you want to leave all of it in there, they all go into asset backed investments. Which give us known returns or known dates. It’s not about gambling with it on the Stock Market, as to what it might finish up with. We know, we can be very predictable and accurate in the predictions that we make, as to what a fund will be worth, at a particular point in time. So, that’s one reason—growth. Second reason, is that you have the ability to release some of those funds, even below the age of 55, to help you grow your property today. And the third reason that you would do it, is inheritability. Now, all pension schemes, if you die before you take or draw your pension—so, this could be an employers’ scheme, a personal pension, or even a SSAS—if you die before you draw your pension, the value of that pot, passes to your nominated beneficiaries, free of Inheritance Tax. And that is common with all schemes. If you have got, if you draw an employers’ pension, or a personal pension, and you actually start taking your pension, and you die, your surviving spouse, assuming you have one, and if you don’t have a spouse, then, that’s the end of your pension. It just reverts to the provider. But, if you have got a spouse, your surviving spouse, will get a spouses’ pension. And that could be, usually, 50% of what you were getting. And when your spouse dies, that is the end of the pension. It dies with you. The pot that is still there, that’s untouched, reverts back to the providing company. But with a SSAS, there is this big pot of money, that is sitting there, it doesn’t belong to a company, it belongs to your Trustees. And, providing you have filled in your nomination of beneficiary form, your nominated beneficiary, which might be your spouse, it might be your children, will then receive that fund, free of inheritance tax. So, one really big reason of using a SSAS for your pension, is that you are creating a big pot of money, which will transfer free of Inheritance Tax, its outside of your estate.

Richard: Yeah, so its great estate planning purposes, if nothing else.

Neil: Oh yes.

Richard: So…I’m sold, so far. So, how do our listeners get themselves ready…how do they go about this? Because, it’s not like going to a bank and borrowing some money, which you would do with a Buy to Let mortgage. What do they need to do, what’s the process, what’s involved?

Neil: It’s a fairly simple process. What you need to do…if you have got frozen pensions, what you need to do is contact the providers, and ask them to send you a transfer value and release forms. Ok, because that actually fixes in your mind, at that particular point, what the value is, of your pension fund. I’m not interested in what you might get if you took your pension at the age of 5%, what we want to know, and what you want to know, is what is the transfer value of those funds today? And that’s the bit that surprises most people. And once, we have got that, we know what we are working with. We can’t really move forward, we can have hypothetical conversations, about what might do and how a SSAS might work, but until we get those transfer illustrations, we can’t really start to work on a transfer strategy or an investment strategy, for a potential SSAS member.

Richard: So, it’s a one step process…

Neil: It’s a simple process. It’s just, pick the phone up, make the phone call to current providers, say send me the transfer values and the release form please.

Richard: And the release form is what, allows somebody else to…

Neil: It’s the piece of paper that you will need, if you decide to go ahead, I that you have to sign, to send those people those funds to the SSAS once it’s been set up.

Richard: Ok. So, in terms of the top line process, obviously, I can get the point that, depending on what the results are, depending on what your investment goals are, depending on your stage of life, etc. that you know what happens next, could be a variety of different things.

Neil: It could be a variety of different things. It usually involves quite a lot of paper, as do most things, but we hold peoples’ hands, all the way through the process. So, we can describe the process, there are various parties involved in making this work, but its all transparent. It’s all pre-approved with HMRC, so they know exactly what they are looking at, and they know what the investments are. The schemes are overseen by, an independent pension fund administrator and they report directly to HMRC. And all of the investments are pre-approved. And they are overseen by a directly authorised IFA. So, it’s not just about working with My Goal Is, there is independent oversight. So, I am not connected to the Pension Fund Administrator, or the IFA, in any way, shape or form. My role is about strategy. And then we have independent oversight by an administrator and an IFA.

Richard: So, very good, there has got to be protection in there. We are talking about peoples’ financial futures, so that makes a lot of sense. General tips and pointers—if someone is listening to this going…I wonder if this might work for me, are there particular, is there a checklist, is there a traffic light system, something like that, which would give them an idea in their minds eye, you know what, that sounds like something I should get involved in, I should look into.

Neil: I think it’s not necessarily a traffic light system, it’s more of the first hurdle, and the first hurdle to get over, is having a fund that you can actually do something with. And, really, you have got to be getting around, it’s got to be of the order, I’d say, £160000, that gives me a little bit of creep room down. Like the client that came in this morning, £126000, yeah it just about squeaks through. But, that £126000, isn’t going to allow a Preference Share Issue for probably 2-3 years’. We have got to grow that fund up.

Richard: £160000, is roundabout…

Neil: £160000 might give us a Preference Share Issue of around, £50000.

Richard: Which it probably wouldn’t be worthwhile doing for that level?

Neil: Well…it depends what you want to do. It depends where you are on the journey. And that why, I think with something like this, this kind of process, is not a one size fits all process. I always say to my team, although we might set an entry level, we really want £160000, there may be a good business case to actually do something at a slightly lower level, but it’s got to be a business case. It’s not, well they have got nice looking eyes, and you know, they talk nicely to us. It’ got to be a business case to actually do this and make it forward.

Richard: So, on the flipside then, what are the downsides, what are the risks or things that people should be looking out for Neil?

Neil: I think, the downside is…I thought quite hard and long about that, to sort of say, what could go wrong. Because of the way, we work with this, its pre-approved, we are only using asset backed alternative investments, the downside is total global meltdown, financial meltdown. The Armageddon scenario, and if that actually happened then it wouldn’t matter what your money was in, we are all in the same boat. You know, the downside is, it doesn’t happen tomorrow. So, if you are the middle of doing a property transaction, and you suddenly realise you have got a load of money in your pension fund and you want it out by Friday, sorry, it’s not going to happen. We are dealing with government bodies, and although we have this Fast Track Approval, and although currently we are working on 6-8 weeks for a SSAS approval, and that works quite well. Transfers…you are in the hands of the current provider. And we have had one transfer that has taken 2 years to complete. Because these kind of people, they are commercial organisations and they will do everything they can to hold on to the money. So, you can’t turn around and say, this has got to happen by a week on Friday, it isn’t going to happen.

Richard: Understood…

Neil: It will happen when it happens, and there has got to be a realistic expectation, as to what the timescales might be.

Richard: Understood. And I guess the other side of it Neil, is what you do with it, once you get the money out, you need to be careful, because you are playing with your future…

Neil: You don’t need to be careful. It is this thing about, protect the Capital at all costs. We won’t realise the money or the funds, the fund administrator, won’t release the money, until the personal guarantees are in place, the Key Man Insurance is in place. Nothing moves until that’s all on file. And then, we build up a relationship with the individual, we are almost like the coordinator, of the whole thing. So, we build a relationship with the pension fund holder, we are talking to them, we are helping them, with their strategies. So, you know, we are holding their hand through the whole process. And they do get, very much brainwashed into, protect the capital at all costs. This is not spending money, this is not money that you are going to spend on a boat. This is money that you are going to invest. And then if you make enough money, from the income that you have made, you can go buy a boat. But, this capital, has to come back, at some point.

Richard: Yeah…makes a lot of sense. And so, I guess it leads onto—I think I know what you are going to say here as well, I had a little dig around your website, but want to talk about resources, that maybe could help people find their way through this. Any particular ones there?

Neil: Yes, if people go to our website, which is www.mygoalis.uk.com there is a pension education video series. It’s 15 short videos, think of them as video Frequently Asked Questions, and they are common questions that we get asked about SSASs and about pensions. What we have done there, is rather than just type up an answer, we have put a little video series together, you can access those, just download all 15, or watch all 15 in one go. And I think that’s quite a good resource to prompt people as to, or even fill in a few gaps, as to what actually happens, how this works and what the alternatives are and how they are overseen. So, that quite a good little resource to go to.

Richard: Fabulous. I guess, in a similar vein, what do you do, it’s a bit of a cue for you, to talk about how you can potentially help people who might be considering this as an avenue to pursue, is there anything unique or special about the way you go about it?

Neil: Well, I believe that the SSAS offering that we have is still unique, within the UK. There are SSAS offerings available, but they are what we would call, traditional SSASs. They don’t provide the freedom of the Preference Share Issue. They create a loan, but the loan is back to the sponsoring company. It has to be repaid within 5 years, and it has to be at a commercial rate of interest. And the money that can be made, we have had clients, we have inherited clients that have had the old style SSASs, where they have really not made, any in-roads, into their property investment from it. Because all the profits are just being eaten up to pay back the loan. And they have transferred that money over, so they have transferred into one of our SSASs, and then used it as a Preference Share Issue. And they have found that a far better way to fund their property investment strategies. So, I think that what we have is unique, I don’t know of anybody else, that is offering this SSAS solution. So, working wih us is fairly easy, I’m in a position where I can give quite freely of my time. Over the 6 years since 2010, I have created quite a high level of passive income, through property investment and through other investment and I don’t need to charge for my services, what I do is met through other means. And I am quite happy to talk to people, answer their questions, initially over the phone, maybe through an online meeting, and we can look at their individual needs. And once we get to the point of knowing, this is serious, then we can start to meet on a face to face basis and start driving it forward. But what we first of all need to do, is to get through this first hoop of knowing we have got a fund we can actually work with. And what I like is for people to come to me and say I have asked the questions of my current provider, I have got the transfer values, I have got the release forms, it looks like it’s in the right kind of order, can we start looking at the strategy that I can use, to help me to achieve my property investment aspirations.

Richard: Very good. So, you are offering your time freely, you can have a chat, you encourage people to get over that first hurdle of getting the transfer value, and you don’t charge, as you mentioned. So very, very good.

Neil: Getting the transfer value, what you have got to think about is, it could be 2 people, it could be a husband and wife, it could be somebody and their partner, their business partner, their life partner. It could just be 2 people that work together through a network, that know each other. Now by investing your money, by putting pensions together, it doesn’t mean to say you have amalgamated your funds you can’t do that. Your fund is still your fund, but by going in together, you benefit from the ability to get into things that you couldn’t get into on your own. So, it’s a great way then of combining 2 peoples’ funds, bear in mind that the average transfer value that people have in this country is around the £80000 mark. So, two people, working together, with an average transfer value, are well above the minimum threshold.

Richard: Find a friend…

Neil: Find a friend, work with a friend. Again, if you go to property networking events or anything like that, there are always people who are looking to do, to work together, that are in the same boat. And I’m pretty sure, that you can find people that you can work with.

Richard: Very good. So, before I perhaps, I am going to ask how people can get in touch with you in a second Neil but perhaps before that, is there anything else that you feel you cannot leave this discussion without expressing?

Neil: I think we have covered…when you asked me to do this, we talked about the general kinds of area that we might look at, and I am looking down my list of things that we could talk about, and I think we have covered most of the things that are there. The thing that I would really, really stress is that Pensions are very much, or the value of pensions is under values. Because all we tend to look is what we might get, when we retire. And I think what we really need to start focusing on, is what is the value of the fund that is sitting behind it, that might provide that pension, eventually. And if you can take control of it, the way that I did, you are then, very much, starting on a journey, which is going to provide you with funds, that you can use to create investment outside the fund, which might mean, you never have to touch the pension fund itself. And that pension fund, could pass in its entirety, on your death to you nominated beneficiary.

Richard: That seems like a fitting note, maybe not so morbid, or sombre, sounds like a fitting note to rest it there and just talk about it being an untapped resource, that you can pass on and you can use in other ways. And that exactly what I wanted to get out over the course of this series. Appreciate that. So, Neil, how can people get in touch with you?

Neil: Well, they can get in touch with me by email, my email is neil@mygoalis.uk.com or they can ring through, we have switchboard here and the switchboard number is 01793 858215. If I’m not here, leave a message with reception, they will send me an email and I will get in touch you as quickly as I can.

Richard: Fabulous, and it works, I tried it myself. Thanks Neil. I really appreciate you taking us through that and I know there is probably a lot kore, that you can share with people, so I would just encourage people to reach out to you, have a look at the FAQ videos on your website, you know, that’s a really good resource in itself and thanks for sharing with us today. I really appreciate it.

Neil: It’s my pleasure and look forward to talking to people.

Richard: Me too. Thanks Neil, you take care.

Property Chatter

Interview with Subject Matter Expert: Neil Ryder.

Resources mentioned:

To see the video FAQs on using your pension for property (and other investment) purposes, visit My Goal Is or contact Neil Ryder from My Goal Is on 01793 858215 or via his website and remember if you  mention The Property Voice to him, Neil promised me after recording that he will also send you a free copy of his forthcoming book as well.

I have to confess that even I was a bit worried about covering the topic of pensions with you today. However, when I first heard Neil talk about the subject around a year ago and how we can potentially free up the locked in values in our pensions to help us with our property investing today, I knew I had to share it with you at the right time.

Let’s just consider a couple of practical scenarios where this could come into play then shall we.

Scenario 1

You might be thirty-something, have friends or a partner in a similar position but are struggling to raise a sufficient investment fund to fully realise your property investing goals.

If we have been in employment, be it public or private sector, employed or self-employed, for any reasonable period of time…say 15 years or more…then we are quite likely to have built up quite a reasonable pension fund once personal contributions, employer contributions and tax credits are taken into consideration. Remember that with generous company pension schemes with a matched employer contribution and tax rebate that the total amount paid into the fund could be between 220% to 245% of our own personal contributions. Then the fund should achieve growth after costs and fees as well. It may be the case that the £80,000 average pension fund value, that Neil referred to, would be realised with a personal monthly contribution of less than £150 within 15 years. Team up with a buddy in the same position and you can start to free up your pension for future property investment purposes.

Based on Neil’s figures of a 65% funds release on the £160,000 combined fund value, we would have an investment pot available to us of £100,000…enough to buy each of the last couple of flip projects that I have been involved with in cash or 4 of these using BTL mortgages.

So, the untapped resource here could start a flip or BTL strategy potentially.

Scenario 2

You are on the downward slope, heading toward retirement age but feel you could be leaving some money on the table by leaving your pension to sail into the harbour of annuities.

With something like 25 years or more pension contributions from a lifetime of employment-based pension contributions, your pension fund value could easily reach the £300,000 mark or more. This could be enough to release up to £200,000 or more for property investment purposes.

Imagine investing that as a private joint venture partner on secured property assets and getting a return on investment of say 15% per annum. This would provide an income of around £16,000 per year and in addition, your investment fund would still be topped up by a further £14,000 a year as well. This compares to let’s say your average annuity of around £6,000 a year with no additional top up to the investment fund.

Now, I must say that I have just made these scenarios up by way of illustration to highlight how powerful these funds could be if we can unlock them. I didn’t discuss them with Neil and nor did I agree the figures with him, so please only treat them as purely potential, yet practical illustrations of some scenarios won’t you?

I will leave you to discuss your personal situation with Neil directly. However, if you are looking to find a pension fund buddy, why not drop me a line and I will see how many others also write in and perhaps if I can match you up to form a pair on the lines that Neil described that might also help to get going.

Just before I end today, a reminder that Damien and I are running a Property Business Planning Workshop in London on 26th November. The link to the event will be in the show notes or just drop me an email and I will share it with you. We are expecting a sell out this time, but you still can try and get a ticket. Alternatively, we aim to run another event early next year, so just let me know and I can add you to the wait-list for that.

Finally, do email me personally if you want to talk about anything from today’s show or more generally in property investing to podcast@thepropertyvoice.net, the show notes will be over at the website www.thepropertyvoice.net

Other than that, I would just like to say thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.

The post Property Financing: Pension Finance – From an ‘Oh sh*t moment’ an untapped resource of pension-funded property investments | S3E10 appeared first on The Property Voice.