A SSAS can lend to its sponsoring company if the loan meets HMRC's five tests. Under SSAS pension loan rules, any loan to a member is unauthorised.
Who can a SSAS lend to?
The company that sponsors a SSAS can borrow from it, which is what people mean by a loan-back. HMRC's Pensions Tax Manual makes such a loan an authorised employer payment only subject to conditions, and says that "All loans are only authorised payments if they are genuine investments of pension schemes. They should be prudent, secure and on a commercial basis."
A loan from your own scheme to your own company carries a tax bill if it goes wrong. Before a penny leaves the scheme, an FCA-authorised adviser can measure the plan against these conditions. The short form on this page wants only contact details, and the call-back it brings is free.
| Borrower | How HMRC treats the loan |
|---|---|
| The sponsoring employer | Authorised if all five conditions are met; an unauthorised payment if one or more is missed |
| A member or former member | An unauthorised payment equal to the amount of the loan |
| A person or company connected with a member | An unauthorised payment in respect of the member, even if the terms would pass for an employer loan |
| Someone unconnected to members or the employer | No objection from HMRC; such loans are normally on an arm's length basis at a market rate |
The five conditions for a loan-back
HMRC says there are "five key tests that a loan must satisfy to qualify as an authorised employer loan". In the manual's terms:
- Security. The loan must be secured throughout its term by a charge that ranks first, over an asset belonging to the company or to someone else. On day one the security needs a value no lower than the loan's face value, interest included.
- Maximum amount. The loan cannot exceed 50% of the scheme's cash plus the net market value of its assets, valued immediately before the loan.
- Term. The repayment period cannot run longer than five years from the day the loan is made.
- Interest. The rate must be at least the one prescribed by regulations: the average of the base rates of six high street banks that the regulations name, rounded up to the nearest 0.25%, plus 1%. A fixed rate is allowed if it is at least the prescribed rate.
- Repayments. Capital and interest must be repayable at least in equal instalments for each complete year of the loan.
New rates come into force each month on the operative date, the 6th working day, and are worked out from the banks' rates on the 12th working day before it, so the figure that counts is the one in force when the loan is made. How it is found for a given date is a point the adviser will talk through on the free call-back.
What changes once the money has been lent
The 50% limit is tested once. HMRC says it "is applied as at the date the money is loaned to the employer", so a later fall in scheme assets does not re-test the loan unless its terms change. A further advance counts as a new loan and faces the test afresh.
HMRC sets a minimum "required amount" due by the end of each loan year, worked out by dividing the loan plus total interest by the number of years and multiplying by the years elapsed. "Front loaded" repayments can still meet it. If the loan's terms leave any loan year short of it, there is an unauthorised payment equal to the largest single shortfall.
Security has to hold throughout. If a loan stops being secured by any charge, the whole amount still outstanding, interest included, becomes an unauthorised payment. If the security is taxable property, such as residential property, HMRC warns of possible extra tax charges. Swapping the asset must leave security worth at least the lower of the old asset's market value and the amount still owed.
If the company is in genuine difficulty and money is still owed when the term ends, the repayment date can be postponed by as much as five years more. That happens once only: "If a loan is rolled over more than once then the unauthorised payments tax rules will apply."
What a failed test costs
Where a loan fails several tests, HMRC takes the greatest single amount and caps it at the loan's original size. So a failed test need not taint the whole loan: under the 50% test, only the excess is unauthorised. HMRC's example is a £100,000 loan from a scheme worth £180,000: the excess over the limit is £10,000, and the company is charged £4,000, which is 40% of it.
The unauthorised payments charge is a flat 40%. For a company, a 15% surcharge is added where its unauthorised payments within 12 months reach 25% of the scheme's value, measured at each payment; for a member the test is 25% of their pension rights. The scheme administrator also faces a scheme sanction charge, which is why HMRC puts the effective total where it arises at 55%, and the surcharge can come on top.
A loan to a member is harsher: the whole loan is the unauthorised payment, not a slice, and the administrator faces the sanction charge as well. The wider tax and reporting picture is in SSAS pensions and HMRC.
What trustees weigh before they approve one
SSAS trustees are usually also the people running the borrowing company, so they sit on both sides of the agreement. The general investment duties in regulation 4 of the Occupational Pension Schemes (Investment) Regulations 2005 do not apply to a scheme with fewer than 100 members. In their place, regulation 7 says the trustees "must have regard to the need for diversification of investments, in so far as appropriate to the circumstances of the scheme". Who the trustees are and what they must know is in SSAS pension trustees.
HMRC's own reason for the 50% cap is that "there may be liquidity problems for the scheme if there is a sudden requirement to provide scheme benefits. It may also not be prudent to lend scheme funds to one company." A loan-back also ties retirement savings to one business: values can fall as well as rise, and members may get back less than was paid in. If the company fails, a first charge helps only while the asset behind it holds its value.
Regulation 12 of the same regulations caps employer-related investments at five per cent of a scheme's resources and, subject to exceptions in later regulations, bars employer-related loans. It does not apply to a "small scheme": fewer than 12 members, all of them trustees (or directors of a company that is sole trustee), with trustee decisions unanimous or an independent registered trustee in place. A SSAS outside that definition is caught by regulation 12. The property side of that is in SSAS commercial property.
Odd cases: guarantees, other companies and personal loans
Can a SSAS lend money to a director personally?
Not within the rules if the director is a member, or connected with one: HMRC taxes that loan as an unauthorised payment equal to the loan, whatever its terms.
Can a SSAS lend to another company I own?
Only if that company is itself a sponsoring employer of the scheme and the loan passes the five tests. Otherwise HMRC treats a loan to a company connected with a member as an unauthorised payment in respect of that member, even if the terms would suit an employer loan. Whether a given company counts as connected is for the adviser to explain free once you fill in the form.
Can a SSAS guarantee a bank loan to the company?
A guarantee by the scheme is treated as a loan of the amount guaranteed, so for the employer it must pass the same five tests, and for a member or a connected person it falls under the member-loan rules.
Is a loan-back the same as borrowing against a pension?
No. A loan-back is the scheme lending its money out as an investment, while borrowing against a pension is covered in its own guide. Why a SIPP has no sponsoring employer to lend to is in SIPP vs SSAS.
Before a SSAS lends to its own company
The tests apply on the day the loan is made and for as long as it runs. The trust deed and registration are covered in setting up a SSAS, and the personal-pension alternative in what a SIPP is.
Not sure a loan-back suits a scheme of your size? Request a call-back using the form here and ask your questions of an FCA-authorised adviser. It costs nothing.
Sources: HMRC Pensions Tax Manual (PTM123100, PTM123200, PTM123300, PTM134100, PTM134600, PTM135100) and legislation.gov.uk, Occupational Pension Schemes (Investment) Regulations 2005 (regulations 1, 7 and 12); read 27 and 29 October 2026.