Personal Pension 

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Investment in commercial property has traditionally been a core attraction for many self-invested pensions, and the merits of bricks and mortar in a pension arrangement are frequently discussed.

Not only can regular tax-free investment growth arrive through rental payments, in the right market conditions we have seen many properties also benefit from capital gains free of tax where the property value has increased. Right now property values are viewed by some commentators as being at (or close to) rock bottom, so it is arguable that now may be a good time to invest.

However, while commercial property may be attractive, there is a major problem faced by some investors: lack of bank funding.


Property purchases can be funded in many ways through a pension arrangement: using existing funds within the arrangement, consolidating benefits from outside the arrangement, borrowing and /or contributions to the scheme.

Prior to the reduction in annual allowance, contributions up to £255,000 could be made without incurring tax charges. By carefully planning changes to an individual’s pension input period, two tax years’ annual contributions could be paid closely together subject to certain conditions. The result of this would be over £500,000 being paid that could effectively be used to fund a property purchase.

However, with the reduction in annual allowance the scope for funding property purchases with contributions has been restricted somewhat. Even where carry forward is available, and with the ability still to change the pension input period, the funding is effectively halved. The most that could be contributed would be £250,000. £150,000 from carry forward with £50,000 from the current tax year followed by a further £50,000 when the next pension input period opens. Where contributions have been made in the previous three years this would impact carry forward available and reduce the £150,000.

Demand for property to be purchased under Sipp and Ssas has remained strong and as already noted interest is very high, especially as most commercial property purchases are known to the investor who can normally spot the opportunities for increasing yields or capital growth.

It has therefore been essential to work with advisers and their clients to find alternative funding options and ways to bring property under the tax-efficient umbrella, particularly where bank funding is less easily achieved.


There has been an increase in joint property purchases with a third-party outside the Sipp. Joint purchase with two or more members remains popular where members pool their pension funds under the Sipp to invest in property, but we are seeing a shift towards purchases with the member personally or the member’s company. In some cases we are seeing part purchases of properties already owned by the third party.

These purchases, if dealt with correctly at outset, should be no more complex to administer than a regular joint property purchase with Sipp members.

The key to their success is ensuring that all parties are in agreement on how these will be operated and are aware of the legislation governing the part of the property that is owned by the Sipp. It is prudent to put in place a Declaration of Trust governing the ownership.