The impact of the 2020 lockdown was felt across various business sectors, particularly retail. To survive, many businesses had to switch to the omnichannel model. For those unfamiliar with “omnichannel retail,” it’s a model that fuses in-store and eCommerce channels. This means businesses can sell products to customers in different ways (online and in physical stores), and they make sure the experience feels smooth and connected.
Recent data shows this market is growing fast, with projections showing a compound annual growth rate (CAGR) of 14% and an expected value of $25.32 billion by 2032. For investors using Small Self-Administered Schemes (SSAS), this presents a compelling opportunity.
This article explores how SSAS pension schemes can be used to invest in commercial property, logistics hubs, and infrastructure that support the growth of omnichannel retail. It also highlights the key benefits for business owners who want to use their pension funds to grow their businesses while building long-term retirement value.
Strategic Role of SSAS in Retail Infrastructure Investment
Among all pension schemes, SSAS stands out for its flexibility as an investment vehicle. Why? It allows greater control over how pension funds are invested. SSAS pensions can be invested in a range of assets such as cryptocurrencies, real estate, and many more. These assets can be categorised under:
- Commercial property
- Company shares
- Loans to the sponsoring employer (within regulatory limits)
- Cash and Deposits
- Funds and Collective Investments
- Other Investments, such as Bonds
Financing Omnichannel Infrastructure Development
Studying SSAS pensions’ financial capabilities, it’s clear that they are suitable to support the infrastructure of an omnichannel. The investment is mutually beneficial, as it helps the business grow in capacity and builds pension wealth. There are five major ways SSAS pension schemes use to support omnichannel infrastructure.
Direct Purchase of Commercial Property
The SSAS itself can directly purchase commercial properties, such as warehouses, retail outlets, or office space, and lease them back to the business.
Here’s why it gets interesting: first, the rental returns received by the SSAS business are exempt from income tax. Second, capital gains are tax-free as the property appreciates. Lastly, the contributions made by the sponsoring company are tax-deductible.
For example, a retailer’s SSAS buys a logistics hub and leases it to the company. The rent paid becomes income for the SSAS, not a taxable event. With many tax burdens removed, SSAS makes it easier to invest. When paired with the rapid growth of the omnichannel retail industry, this creates a unique opportunity to build both business assets and retirement wealth.
Borrowing
An SSAS can borrow up to 50% of its net asset value. This gives the retailer the financing backing to acquire or develop properties and equipment needed to run the business effectively. Additionally, there is financial relief. They don’t have to depend totally on business cash flow or external lenders.
Business Funding
Under the HM Revenue & Customs (HMRC) rules, SSAS schemes are able to provide loans to the sponsoring employer. The funds can be used in various parts of the business. For an omnichannel retailer, you’ll expect something like warehousing upgrades. Aside from the business benefits, the pension scheme earns interest. This, in turn, boosts the retirement pot.
Joint Property Purchase
If the SSAS doesn’t have enough capital to buy a property outright, it can co-invest with the sponsoring employer or other SSAS members. This shared ownership structure allows businesses to access high-value infrastructure without overleveraging. For example, a business owner and their SSAS each contribute 50% toward a distribution centre.
Investment in REITs or Property Funds
If direct ownership isn’t feasible, an SSAS can invest in Real Estate Investment Trusts (REITs) or property-focused funds. These vehicles give indirect exposure to retail and logistics real estate markets and can offer liquidity and diversification.
Benefits of SSAS Investments for Omnichannel Retailers
SSAS investments combine long-term pension planning with business growth. This gives omnichannel businesses a competitive edge. They also offer flexible and tax-efficient solutions that meet today’s retail infrastructure demands. Here’s a breakdown of the advantages;
- Tax efficiency: Thanks to tax relief and exemption from capital gains and income taxes, SSAS investments offer strong potential for long-term pension growth.
- Control and flexibility: Business owners have complete control of where and how the pension fund is invested. This autonomy allows the owners to make only decisions that align with their plans for the omnichannel business.
- Dual-purpose investment: With a successful investment, everybody wins. The company gets to build its revenue. At the same time, the retirement pot yields interest.
- Intergenerational Planning: SSAS schemes are not limited to pensioners. There is room for other family members. This enables wealth transfer and succession planning.
Considerations and Compliance
Although SSAS offers remarkable benefits to all parties involved, it’s not without complexity. There are rules each party must abide by. Also, the HMRC has regulations concerning SSAS investments. For example, commercial property must be let at market rates. Failure to abide by the HMRC terms results in tax penalties and loss of tax advantages.
Another factor to consider is liquidity. Since commercial property is an illiquid asset, it may take time to release funds when needed. Investors must also account for ongoing maintenance, property costs, and legal obligations.
To ensure you abide by all rules and your investments are profitable, it’s best to consult a financial adviser. Experts in different fields are also required. For instance, an SSAS administrator helps maintain compliance. On the other hand, a property specialist will help you ensure accurate valuation and proper leasing terms.
Why SSAS Pensions Are Worth Considering for Business Owners
SSAS pensions can become a powerful investment vehicle, as seen in this guide. For those in the omnichannel retail market, they get to build their business alongside their retirement funds. There are numerous benefits to this investment vehicle. They include reduced taxation, investment flexibility, and business funding capabilities. However, to enjoy the investment, you have to stick to the guidelines set out by HMRC.
Note that before making any financial decisions, you should consult experts in that field. They help you make smart financial decisions while keeping you on the legal path.
