If you need help in releasing money from your pension to buy commercial property you should take advice from and independent financial adviser (an IFA) specialising in this area. As an independent finance broker we have been working with specialist IFAs to bring their pension funds into play to help our clients raise money to buy commercial property. Combined with a commercial mortgage this may provide the perfect funding solution.
Here are a few notes to help you decide whether this might be a good idea for you.
Type of Property
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- Freehold or leasehold is acceptable
- The trustees own the property, the plan holders are the beneficiaries
- The company leases the property from the pension plan trustees on normal commercial terms (supported by professional valuations)
- If the trustees are happy to purchase the property on behalf of the scheme beneficiaries and they are able to confirm that it meets the criteria of the Inland Revenue for assets of an approved tax exempt pension plan, then they are able to use existing plan assets and mortgage to purchase the property
- The trustees are also normally willing to consider refurbishment or renovation of the property to maintain it’s value, but this must also be approved in advance
- It is possible to use either a Self Invested Personal Pension (SIPP) or a Small Self Administered Pension Scheme (SSAS) as the vehicle to purchase property
- It is possible for SIPP and SSAS plan holders to pool their assets to purchase property together.
The trustees are able to borrow up to 50% of the value of the fund (this means that where the pension fund is valued at say £150,000, the trustees can borrow a further £75,000 and purchase a property valued at £225,000).
The first stage is a feasibility check – to confirm that the pension trustees would be willing to consider the investment and then compare the advantages and disadvantages of a pension funded property purchase with a straightforward company funded property purchase
