Client profile: Felbrigg Lodge
- "I thought I would be working for the bank now but I'm working for my pension fund, my money. When it comes to paying the bill at the end of the month I'm paying myself. I'm always happy."
- Saved "shedloads" of tax by using Pension-led funding to develop hotel
- Existing pensions transferred into a SSAS
- £75,000 loan secured on the company’s balance sheet assets
DeeDee Lomax found herself on a rollercoaster when she started running her Norfolk hotel.
The ride took her from “six months of hell” to the “strongest position” she could remember and occupancy rates of 73 per cent.
Along the way she was hit by the financial crash and a fire but also saved herself “shedloads of tax” by using Pension-led funding to develop Felbrigg Lodge rather than drawing a lump sum from her pension, an investment she has forecast would add £100,000 turnover in the first year alone.
DeeDee bought Felbrigg Lodge, near Cromer, in 2007. The following year, in the middle of renovation work, came the banking crisis. Everything was thrown up in the air as the “mortgage people suddenly changed the rules” and refused to lend all the money she was banking on.
“That was our introduction to being here,” said DeeDee, who has spent most of her working life in the hotel and catering industry.
Fightback No1 came with the rise of the staycation.
“People, for all sorts of reasons, were not going abroad,” remembers DeeDee. Light at the end of the tunnel perhaps? But just as her business began to thrive again, she was hit by another hammer blow.
“Four years ago we had a fire in the restaurant. We thought that would be the end of us. It came right at the end of the recession and was six months of hell.”
DeeDee was determined not to be beaten and launched fightback No2.
She had already raised initial funding to finance a family-friendly unit sleeping six aimed at those who wanted a break with elderly or infirm relatives or somewhere offering the attraction of teenagers having their own room.
Now she had to find a new home for her restaurant and planning permission for a second family unit was about to run out.
The solution was to move the restaurant into her own house but that didn’t come cheap. “I thought I’m not going to spend all that money to comply with regulations and then move it back again.”
The market was also changing. The wellness sector was booming and Dee Dee was desperate to add a second identical 800 sq ft unit to be able to offer spa-style breaks as well.
“I looked at conventional routes for funding but you had to jump through too many hoops and I didn’t want a second charge on my property,” she said.
“My pension was sitting there and I thought who knows what is going to happen to it? I wanted a bit more control over my pension.”
An email from Pension-led funding arrived at an opportune time to stop her using pension freedoms to cash in her whole pot.
DeeDee and her husband, Philip, transferred their existing person pensions into a Small Self-Administered Scheme (SSAS). The funds were then used to lend 50 per cent of the fund value, £75,000, secured on the company’s balance sheet assets.
The couple also drew down their 25 per cent personal tax-free cash entitlement of the whole pension fund amount, resulting in excess of £100,000 being raised for the business.
“I saved myself shedloads of tax,” she said. “And I’m going to pay that pension back within five years so it’s a no brainer.”
DeeDee said she had enhanced her business which now has 12 rooms, as she targets those looking for rest and recuperation and potentially recovering from serious illnesses.
The area’s patchy mobile phone coverage has become a blessing. “When people arrive they shout at me because they can’t use their phone. By the end they are hugging me!”
She has also discovered an unlikely benefit from borrowing from herself.
“The banks only offer you an umbrella when the sun shines. I thought I would be working for the bank but now I’m working for my pension fund, my money.
“When it comes to paying the bill at the end of the month I’m paying myself. I’m always happy,” DeeDee said.
“I would definitely go back to my pension without even thinking about it.
“I’m thinking about how I can put more money into my pension fund so I can get more money out of it to invest in the restaurant. It’s changing the whole way I run my business and fund my business. I’d do it again in a heartbeat.”