If the volume of enquiries in this category is any indication of understanding and appreciation, this is fast-becoming a growing use of pension schemes, particularly amongst business proprietors over the age of 50.

Consider a quick example.

A business proprietor, age 52, has a pension fund of £400,000. He has been struggling to maintain his overdraft or borrowings within his bank limit of £60,000 but foresees a need to increase his company’s overdraft to around £80,000. He thinks the need for this increase will only be temporary and, indeed, hopes to reduce his overdraft over the next six months. His bank, though, are not enthusiastic and even if they agree to the new facility they will insist on high arrangement fees and punitive interest rates. Instead, the proprietor takes the maximum amount of tax free cash from his pension fund - £100,000 - and puts the money on deposit. He can, from then on, ‘borrow’ money from this deposit fund when needed and repay the fund when possible. Moreover, if the facility is no longer needed the money can be re-invested into the pension scheme, attracting tax relief, of course.

Other examples from The Pensions Office client bank include people using the pension scheme tax free cash to:

            -            reduce borrowing;
            -            meet the cost of a new venture;
            -            contribute to expansion costs;
            -            pay for capital expenditure;
            -            pay pressing debts; or
            -            release or avoid the proprietor’s personal guarantee for borrowings

It is worth remembering, always, that this money can be re-invested into the pension scheme if the financing need ceases.

It must be remembered that the minimum age to take benefits from a pension scheme, currently 50, becomes 55 in April 2010.

So, if you want a convenient and cost-effective method of financing business debts or expansion…………..