Can a pension fund own residential property?

Technically, you can buy residential property with your pension fund, but HMRC will hit you with a hefty taxable bill. With the restrictions on residential property purchases in mind, you may prefer to invest in commercial properties, which come with many tax benefits.

Can you invest your pension in commercial property?

In the same way that your pension can be invested in stocks and shares, it can also be invested in the bricks and mortar of commercial property. The types of buildings that qualify are warehouses, retail units, offices etc. You can’t invest your pension into residential property.

Can property be your pension?

As set out above, residential property is not permitted to be owned by a pension scheme and will result in considerable tax penalties. The only exception being if residential property forms part of a well diversified investment fund.

Can my SIPP buy land?

In a word, yes. A SIPP can buy land. It’s common for investors to use a SIPP to fund a commercial property purchase. In most cases you will also be able to borrow up to 50% of the value of your pension to help fund the purchase, and/or to pay for the costs of developing it.

Can I use my pension to pay off my mortgage?

If you are aged 55+ and have a personal or company pension you are not currently paying into or receiving, you can cash in 100% of your pension as a lump sum to reduce or pay off your mortgage – up to 25% Tax Free.

How do I use my pension to buy commercial property?

Many businesses need to borrow money to help them buy a property; subject to certain rules, your pension can do the same. Simply put, your pension can borrow up to 50% of its value to help fund the purchase of a property. A pension can borrow from a bank, much in the same way your business would do.

Who owns the property in a SIPP?

The reality is that it is the Sipp that owns and has responsibility for any property held within a Sipp scheme. Forgetting this important distinction can not only land the Sipp-holder in strife with the Sipp provider, but can also throw up potential difficulties when the client comes to retire.

Can I buy a house with my SIPP?

Your SIPP can buy properties using mortgage financing, and can also buy shares of a property that owns properties in a SIPP in conjunction with other SIPPs. However, you can only borrow up to 50% of the property’s value.

Can a pension fund be used to buy a house?

As you can see, SIPP residential property rules and the tax implications are a bit of a minefield. If you are considering using a pension fund to buy a house, you really must take professional advice, ideally from a financial adviser in relation to your pension, and a mortgage adviser in relation to your property purchase.

How is a property owned by a pension scheme?

That property is then owned by your pension. The pension scheme then lets the property back to the business for an agreed rent. Every time that you pay your rental fees, the money goes into your pension and not to a landlord. In effect, you have secured your business premises which is now classed as a tangible asset in your pension.

Can a pension be used to buy a commercial property?

Using a pension fund to purchase a commercial property is very tax efficient as the rent paid into the pension fund is not subject to Income Tax. If the property is let back to the business the rent paid would be treated as a tax-deductible expense.

Who is the beneficial owner of a pension?

All purchases, sales and lettings must be on a totally arms length basis from the beneficial owner of the pension arrangement. This includes but is not limited to any connected person or entity e.g. their employer or associated company and family members.

Can a pension fund buy a commercial property?

You can purchase a commercial property with Investment Regulated Pension Schemes which are commonly known as Small Self-Administered Schemes (SSAS) or Self-Invested Personal Pensions (SIPP). These types of pension scheme can either buy the property outright or take out a mortgage to purchase the property.

What kind of property can a pension scheme invest in?

Setting aside pooled property funds (unit trusts, investment trusts, REITs etc), we are discussing here direct property acquisition by pension schemes. This is usually considered to be the domain of Sipps and Ssas’s although larger occupational schemes also invest in this sector:

Can you buy property with a self administered pension?

One of the key features of self-administered pensions is the ability to identify and buy specific property. Here is a list of the top 8 reasons why we believe investors choose property as part of their investment strategy: You choose the property you wish to purchase. It can be residential or commercial.