Business + Finance + Law

Building Your Business through Pension Backed Funding

Financing a business in any economic climate is an uphill battle in an already crowded field. Small businesses mushroom every day all over the country and more than 80% of them depend on bank loans, peer lending, crowdfunding, equity finance and other lines of funding. The competition for funds means that chances of securing financing from these obvious sources is very slim. As such, you have to think slightly outside the box when sourcing funding for your business venture at whatever stage of growth.  You can also consult Cashfloat financial advisor or a pension guide UK to get more in-depth information on how you can save for and spend your pension wisely.

Pension-led funding

If you want to start a business or finance the growth of an existing one, you should seriously consider pension-led funding.


Simply put, a pension is a fund set up to hold ongoing monies saved up for retirement. It is primarily designed to provide a stockpile of cash that can support you once you have called time on your career. Ordinarily, you can only access your pension fund at the retirement age of 55.

However, what most people fail to understand is that this money is not “locked away” and beyond usable reach until retirement. You can actually access some of your pension funds at any age and use it to start or support the growth of your business. This is called pension backed or pension-led funding.

How it works

Pension backed funding is available to anyone who has accumulated money in their pension fund from present or previous employment and needs funding for their business. This pension money is invested under the Self-Invested Personal Pension (SIPP) scheme. If you are several owners or directors of a company, business partners or family members, you can also amalgamate your pensions to create a bigger “investment pot”. This you will invest under the Small Self-Administered Scheme (SSAS). These pension schemes provide various regulations for investment and tax benefits.

Applications of pension-backed funding

Under the pension schemes, individuals make their own investment choices with the approval of the HM Revenue and Customs (HMRC). The investments that a pension scheme can make include purchasing intellectual property assets, procuring traded endowment policies, loaning money, buying shares, sheltering profits to mention but a few. Each use is regulated by its own unique set of rules, which you must make sure to understand before proceeding.


The two most popular pension backed investments are:

  1. Purchase of commercial property

If you are looking to buy a premise for your business, you can use your pension fund. You can either, make a full property purchase or make a partial purchase depending on your business plan and size of your pension fund.

  1. Sale and leaseback of commercial property

If you already own a business premise but want to inject some liquidity into your business, you can avoid borrowing from a financial institution using the premise as security. Using your pension fund, you can become your own landlord. You achieve this by purchasing the property using funds from your pension scheme or borrowing up to 50% its value from a bank to facilitate the purchase. After the purchase, the premise can then be leased back to your business with rent payable to your pension scheme.

In conclusion

A pension is not just for retirement. You can use it to launch and build a successful business. As outlined above, pension backed funding provides very many possibilities that can facilitate business growth. Despite this, your business could always fail since most do. As such, you must be very careful before investing your pension into business. Have all the facts right and enough information to justify the risk.

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