Commercial Property Investment via a pension fund

Investing in commercial property is an extremely popular feature of Self-Invested Pension provision, particularly for business owners.

There are a number of advantages of using a pension fund to purchase commercial property:

Key Benefits

  • The purchase may be funded by employer or member contributions on which tax relief will have been received.
  • The pension fund may borrow up to 50% of its Net Assets in order to facilitate the purchase.
  • Rent paid to the pension fund is free from Income Tax and any realised gain on sale is not subject to Capital Gains Tax.
  • The Rent payable by the tenant will be treated as a business expense for tax purposes
  • Property is outside the member’s estate for Inheritance Tax and may be passed on to any nominated beneficiaries on death. Income tax will be payable by the beneficiaries if the member dies after the age of 75.
  • The Property owned by the pension fund is outside of the business so is protected from creditors in the event of insolvency.

 

Possible disadvantages

  • Property is an ‘illiquid’ investment and may take some time realise. It is important that your pension fund also contains some liquid assets, particularly as you near retirement.
  • Loss of control – once the property is owned by the pension fund it is subject to various regulations associated with UK pension funds. Whilst these rules are principally designed to protect the interest of pension scheme members the result is that there are more conditions imposed on the owner than if the property was owned by the member(s) or their business.
  • Property values may fluctuate and can go down.

For these reasons it is important to seek independent financial advice before deciding whether to purchase commercial property via your pension fund.

 

Why use Organon for Property Purchase?

At Organon we are specialists in commercial property and the management team have completed many hundreds of commercial property transactions over the years. The following features of our service provision make Organon an extremely popular choice for professional advisers with clients looking purchase to commercial property via their pension fund:

  • Flexibility over your choice of solicitor – we have no compulsory panel and our only requirement is that your chosen conveyancer has experience of dealing with pension fund property transactions.
  • Flexibility over your choice of surveyor – as long as they are practising RICS members we are happy to use them.
  • Joint purchases with companies or individuals are permitted.
  • The member may act as their own property manager – there is no mandatory appointment of external property managers.
  • No mandatory block insurance.
  • We are happy to complete VAT registration, Election to Tax and reporting at your instruction.
  • For SIPPs, joint purchases are transacted via an additional “Group SIPP” at no extra charge.
  • No annual property charge.

Note that it is not possible to invest in overseas property or hotel rooms via the Organon SIPP.

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