Since banks have cut down on their lending, it’s no secret that SMEs and start-up businesses have been forced to look at alternative finance options to grow their business. Peer-to-peer lending such as crowdfunding has gone from strength to strength on the back of this, growing over 100 percent each year for the past three years. However, it is not the only form of alternative finance out there, and other methods have arguably been overlooked in the past. One of these is Pension-Led Funding – using a pension pot to generate a loan for your business.
Essentially, it’s all about making your pension work harder; it allows business owners to borrow funds from an existing pension and invest them in their company. Business owners will first need to move their retirement funds into a self-invested pension (Sipp) or a small self-administered scheme (Ssas). These are the most flexible types of personal pension which can fund either a commercial loan from the pension scheme to the business, or the purchase of intellectual property.
The difficulty in getting a traditional loan or investment is convincing the bank that your business is worth taking a chance on. However, with pension-led funding, you take on the risk yourself by loaning your pension fund to use as capital.
Furthermore, unlike taking a loan from a bank, there’s no risk of losing your home or being hit with charges should you default. The flexibility and independence is what makes pension-led funding such a viable option for many small businesses.
However, there are some downsides. It is recommended that there be around £50,000 in the pension pot for this form of funding to even be worth considering. Clifton Asset Management advises that the maximum loan from a SIPP should not exceed 60 per cent of the total pension pot, and regulation dictates that for an SSAS loan, it should not exceed 50 per cent.
Pension-led funding will not necessarily be the quickest way to access funds; the process usually takes between six and twelve weeks. And of course, the biggest thing to remember is that should the business fail and the loan be unable to be repaid, you risk losing a significant chunk of your pension.
Rapid Retail, a company who hire portable retail units for shows, exhibitions and matches, chose pension-led funding to expand their business. Founder Nick Daffern wanted to grow the business, but believed getting a loan from the bank would be a waste of time. He said:
“Times have changed and it’s all about finding appropriate tools for the type of finance you need. We knew about the alternative funding sector and had even used it before we were contacted by Clifton Asset Management. They talked to us about pension-led funding and we thought it was an absolute win-win because we could invest in our business while gaining tax effective pension growth – the perfect solution.”
Nick and co-founder Andy Moss transferred their £130,000 pension pot into an SSAS. Taking £100,000 from their pension scheme, they invested the money directly into expanding the business – and they’re very happy with the decision.
“We’ve set our pension repayments at around 7%; a far better return than we’d seen from our regular pension providers and it’s
highly tax-efficient for Rapid Retail.”
Charlotte Dean worked as a personal trainer and Pilates instructor for 19 years, before setting up Careers in Fitness, which provides training and qualifications within the sector.
“I chose pension-led funding instead of a bank loan because it allowed me to invest my own money into a business I totally believed in.
“By monetising the Intellectual Property value held within Careers in Fitness Global, I was able to utilise an asset class that many businesses would not recognise. It was also reassuring that IP has been widely recognised as an appropriate pension investment by HMRC for almost 10 years.”
When looking at finance options for your business, pension-led funding may not be the first route that springs to mind. However, if the idea of putting your own money into your business without reliance on banks or other investors, it’s well worth considering.
For more information on how to get started with pension-led funding, pensionledfunding.com
Oil prices rose more than $1 a barrel on Thursday after stock markets began rallied across the globe.
Monday’s meltdown in China pushed oil price down further on worries that demand from China would dry up. However, Brent, was up $1.50 at $44.64 at open this morning and U.S. crude was up $1.50 at $40.10 a barrel.
Oil markets moved up from six-and-a-half-year lows reached earlier this week, but worries of oversupply and a lack of demand continue to render the future uncertain.
Several large oil companies have made cutbacks in the light of the crisis, with Total announcing today plans to sell its assets in the North Sea.
“The trend is strong and down. However, do not be wrong footed by a correction higher,” PVM Oil Associates technical analyst Robin Bieber told Reuters. “Few markets head forever in one direction with no respite.”
UK house prices rose at their slowest pace for more than two years, according to mortgage lender Nationwide.
House prices rose 3.2 percent year-on-year in August, compared with a 3.5 percent rise in July.
However, Nationwide’s chief economist Robert Gardner noted the importance of increasing construction:
“However, survey evidence cautions that this trend may not be maintained unless construction activity accelerates.
“Surveyors reported the lowest ever number of properties on their books in July – on data extending back to the late 1970s – whilst new buyer enquiries picked up.”
Rival mortgage lender Halifax’s figures show a faster pace of growth then Nationwide’s, although theirs has also slowed significantly. Halifax reported earlier this month that house prices across the UK were rising at 7.9% a year; however both lenders use different methods to achieve their results.
China’s markets showed tentative signs of recovery today after the Shanghai Composite closed up 5 percent higher at 3,083.59, restoring confidence in the global markets.
In early European trading, both the FTSE 100 and Germany’s DAX were up more than 2 percent. Shares on Wall Street also saw their biggest rise in four years.
US Federal Reserve official William Dudley also commented that the recent events may be enough to push back a rate rise from the expected September date, lifting the mood further.
Oil prices are also see a hike from their rock bottom prices as market volatility begins to calm.
Net migration to the UK has reached its highest level yet, according to figures released today by the Office of National Statistics.
In the year to March net migration was 330,000, compared to 236,000 in the same period a year ago.
The figure is the difference between those leaving the country and coming in, and is three times the target set by Prime Minister David Cameron in 2010.
Immigration Minister James Brokenshire said it was “deeply disappointing”.
The figure was fairly evenly split between those coming in from the EU and those from outside the Union. Net migration of EU citizens was 183,000, with the figure from other countries standing at 196,000.
The former special advisor to Gordon Brown has taken to Twitter to issue a warning about the future of the economy, after Black Monday’s catastrophic stock market slide.
In a series of ominous tweets Damien McBride cited the need to stock up on “canned goods and other essentials”, apparently in preparation for the upcoming apocalypse.
Advice on the looming crash, No.1: get hard cash in a safe place now; don't assume banks & cashpoints will be open, or bank cards will work.
He then calls the Fed’s handling of the markets “madness”, insinuating stabilizing measures are the equivalent of “putting a dummy in.”
Mr McBride was special adviser to Gordon Brown and head of communications at the Treasury for a period during the last Labour government
Chinese shares dropped further on Wednesday, totalling a total market fall of 16 percent over the past three days. The FTSE rallied somewhat this morning, but dropped down 0.8 percent in afternoon trade.
Oil services company Cameron International (NYSE:CAM) is trading up 19 percent today on the news of its acquisition by Schlumberger (NYSE:SLB), the world’s largest oilfield-services provider.
The deal is valued at $14.8 billion and has been unanimously approved by the boards of both companies. The merger will combine two complementary technology portfolios into a “pore-to-pipeline” products and services offering to the global oil and gas industry.
Paal Kibsgaard, Chairman and Chief Executive Officer of Schlumberger said in a statement:
“This agreement with Cameron opens new and broader opportunities for Schlumberger.
“We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger’s reservoir and well technologies with Cameron’s leadership in surface, drilling, processing and flow control technologies.
“We look forward to working closely with Schlumberger to achieve a seamless post-closing integration and long term value for all of our stakeholders.”
Schlumberger is currently trading down 2.39% on the news, at 70.77 per share. (1449GMT)
Commodities have had a rough couple of months, and the rout shows no sign of abating. Crude Oil is currently at $39 a barrel, with Brent Crude at $43; compare these prices to those of a year ago, when oil was over $100 a barrel, and it’s clear there has been significant volatility in the sector. But the question on everyone’s lips is: how low can it go?
Oversupply and weakening demand has caused the dramatic drop in oil price over the last year. Whilst demand was high, oil companies began to produce more; the US in particular has been pumping more and more oil, as has Saudi Arabia. Furthermore, the nuclear deal with Iran means sanctions have lifted and millions of barrels of Iranian oil will enter the market for the first time in twenty years, exacerbating the problem further.
This problem is coupled with an unprecedented drop in demand. Many expected China’s hunger for oil to soak up the excess oil produced; however, with the ‘Great Fall of China’ casting aspersions upon the health of the world’s second biggest economy, demand from the region has dried up significantly.
High production and low demand has led to fierce competition in the industry and the U.S. rigcount has dropped to a 12-year low. Coupled with deep lay-offs and cutbacks in the sector, domestic production should drop significantly in the near future, perhaps evening up supply and demand.
Image: MoneyWeekSo what lies ahead for oil?
According to the August OPEC report, global oil demand is expected to pick up in 2015 by 1.38/mb.d. Demand is showin signs of recovering in some countries, but until production shows signs of significant decline, crude oil prices will remain low.
According to Gulf News, recovery may take a while; especially with the impact of Chinese markets causing prices to drop to a six year low on Monday.
Ole Sloth Hansen, Head of Commodity Strategy, Saxo Bank, told Gulf News:
“Fears about weaker global growth, especially in China, have hit the market at a time where supplies of key commodities from oil and copper to iron ore and corn have been rising. Mining and oil companies have all been expecting a continued strong rise in demand from emerging economies.”
The effect of this crisis on countries whose economies rely on oil production is huge, and some blame OPEC, the intergovernmental oil organization, for not intervening to stabilize the markets. The organisation met in 2014 but decided not to implement measures to control production; the price of oil has since fallen nearly 50 percent.
Russia is one such country facing difficulties; wealth from oil gives Putin’s government strength, and as shown by their recent economic downturn, the country heavily relies on oil exports to keep it afloat. Similarly, oil money funds the extravagant lives of countless Saudi princes and the urbanisation of their countries. Slower demand and weak oil prices also risk impacting upon smaller producing nations such as Venezuela and Nigeria, where oil exports account for 35 percent of GDP.
The history of oil is littered with booms and busts and so in the bigger picture, this rout is nothing new. Furthermore, oil is not alone – the drop has been commodity wide, with diamond giant De Beers recently announcing a 9 percent cut in retail prices as demand for diamond slows. Much of the global economy has been affected by political and economical problems of late – including the situations in both Greece and China – and the fall in commodities is just one reaction. History shows that the price of oil will, without a doubt, recover – but by all accounts, it’s unlikely to be before the middle of next year.
According to Spread Betting firm IG Markets, The Dow Jones is set to open up over 400 points.
The Dow sold off heavily in the final hour of trading yesterday but futures held at the previous days low, a key technical factor for investors who are looking for the market to build a base before a rally.
Even though Chinese stocks finished in the red, they were down (a mere) 1% after days of selling of around 8%.
These two factors along with cheap valuations maybe the primer for a relief rally in global equities.
“The failure of Chinese authorities to provide any indication of support for the markets over the weekend saw panic selling ensue on Monday, Tuesday we witnessed the dead cat bounce die in the US, however we are now starting to see a degree of rationality return with investors looking to buy value as the market looks to establish a bottom” said Mr Davies of Charles Hanover Investments.
The number of mortgage approvals in Britain rose in July to their highest level in 17 months according to the British Bankers’ Association, spelling good news for the housing sector.
Richard Woolhouse, chief economist at the BBA, said:
“Savvy homeowners are snapping up competitive deals before an expected increase in interest rates.”
British banks approved 46,033 mortgages for house purchases, the highest number since February 2014. That was up from 44,802 in June and up 11 percent from a year ago.
The number of mortgages approved for remortgaging jumped 29 percent and was its highest in four years.
Turmoil in China has invited questions into whether the Bank of England may push back a rate hike. However, this positive news from the housing sector may well put the hike on track.
