Pension Investment in Private Companies

Self -administered pension holders and their financial advisors often look for a different type of investment, one which provides a different risk profile and level of return. Investment in private companies is an opportunity that can be considered.

Currently, there are regulatory restrictions relating to the level of private company share capital that a pension scheme can purchase. A more flexible alternative investment is lending by pension schemes to private companies and this has become the favoured approach. 

Investment by pension schemes is an important element in the non-bank lending market, which  is often seen as a potential solution by private investors who are confronting low yields and heightened market volatility. Non-bank lending of this type plays an important part in the larger economy and in the local community. This has especially been the case in recent years when bank credit was unavailable to many start-ups and small companies.  

To accommodate the desire for this asset class, ITC has created a way for pension schemes to provide loan facilities to private companies in Ireland and the UK. We call it the Venture Bond. The Venture Bond operates within a fixed set of parameters which makes the process more straightforward and cost-effective. They are as follows:

• A pension holder can invest: €50,000 - €250,000.
• Interest accrues at  minimum 8%. A higher rate of interest can be agreed with the company. Interest can be paid on a monthly, quarterly or annual basis.
• The Maximum loan term permitted is 5 years.
• Purpose: the purpose of the lending is limited to four broad categories:
  • Working capital
  • Borrowing for company restructuring or group restructuring
  • The purchase of a specified property
  • Specified business expansion

In each case, a personal guarantee from a company director or shareholder will be provided to the investing pension. 

Timeframe: Where all required documentation is completed promptly by the company and approved by ITC, the investment can be finalised within as little as two weeks, from the initial instruction received by us to drawdown of funds.

The Venture Bond is provided by us as a pre-packaged solution at a once-off fee of €2,750 plus VAT and outlay. In addition, there is an annual management fee amounting to 0.3% of the loan principal. On drawdown, this will be charged in advance for the entire projected term of the loan.

If you would like further information on the Venture Bond, please email patrick.oconnor@independent-trustee.com. 

Independent Trustee Company Limited, part of the ITC Group, is regulated by the Central Bank of Ireland.
Please note that the provision of this product or service does not require licensing, authorisation, or registration with the Central Bank of Ireland
and, as a result, it is not covered by the Central Bank’s requirements designed to protect consumers or by a statutory compensation scheme
 

_{*Please note this content is the view of the author and not of Independent Trustee Company}