AMPS have written to Greg Clark, the new Financial Secretary to the Treasury, with updated suggestions for using pension fund monies to stimulate economic growth.
The proposals, dismissed by the previous Government in 2009, urge loanback rules to be slightly relaxed, loans from SIPPs to be introduced, plant & machinery to be a permitted investment and property borrowing limits to be increased.
Speaking about the proposals, chairman Andrew Roberts commented: “It is clear that banks are reducing their lending to small to medium businesses despite Government initiatives. Business owners are happy to use their pension funds to provide this missing finance, and can do so on a secured basis, but cannot meet the requirement for a first charge if there is already bank lending in place. This small change could reinvigorate many businesses and could be introduced at low cost and low risk to the Exchequer.
“It is also clear to me that the reduced borrowing limits introduced in 2006 were part of a package to control the investment in residential properties by pension schemes. Additional legislation was brought in to stem this and so the borrowing limits should revert to something sensible now. An effective maximum loan to value of 33% is too low for commercial property transactions.”
Notes to Editors
The proposals are that:
1. the authorised employer loan criteria are amended i) to allow loans secured by a charge that is not the highest ranking charge but with an increase in the minimum interest rate to 3% over base rate and ii) to increase the maximum term to ten years.
2. business owners who have a SIPP should be able to make loans to their own businesses on similar terms as authorised employer loans, something considered less risky than unsecured loans to individuals which are currently permitted.
3. large items of plant & machinery are excluded from the definition of taxable property and so pension schemes could do leasebacks with companies to inject cash into businesses.
4. borrowing limits are increased, preferable to pre A Day levels, which would make it easier for pension schemes to find the finance to do leasebacks with company premises.
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