My property is my pension – and now it can be!

Published by Tim Maakestad on 21 September 2021

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The holding of commercial property or land within a pension trust can be a very effective method of owning this type of asset, especially if this is leased to an associated business connection.

Both Self-Invested Pension Plans SIPPS and Small Self-Administered Schemes SASS can own land and commercial property and an increasing number of investors benefit from this type of property ownership.

The potential benefits can include:

  • Any growth in the commercial property / land value when held in a pension can be free from capital gains tax on the eventual sale.
  • If the business leases the property from the pension, then the rent can be allowable as a deductible business expense.
  • The rental income received to the pension may not be subject to tax as it is reinvested within the pension.
  • There is no inheritance tax liability in the event of the death of a member and the passing on of pension monies to beneficiaries within the pension trust can be very tax-efficient going forward.
  • Individuals are able to contribute to pension provision and receive tax relief at their highest marginal rate when doing so.

Investment into specific assets is not without risk and these can include:

  • Commercial property can take longer to sell than other types of investments and there may be costs associated with the sale.
  • There may be times when the commercial property is vacant with costs accruing whilst no rent is being received.
  • If this property is rented to a third party and payments stop then there may be significant costs in recovering this outstanding rent and withdrawing the commercial property from this tenant.
  • It is possible for the property value to fall due to adverse conditions which may affect the overall benefits at retirement.
  • It is possible that tax rules and future pension legislation may change making this option less affective in the future.
  • The overall diversification of assets within the pension can make this a high-risk proposition.

Most types of commercial property are ordinarily acceptable including offices, warehouses, factories, shops and land. This can make pensions a very useful structure when considering the purchase of this type of asset.

Please note that this is a very specialist area and advice must be sought from a suitably qualified Independent Financial Adviser before deciding on this route. With that done, the ability to draw 25% of the fund value as cash, tax-free, and the option of an income, currently all from age 55, although due to increase to 57, makes this one of the first things to consider when planning your retirement.

The property really is my pension!

Please contact us on +44 (0)330 124 1399 or by completing our online enquiry form for advice regarding retirement planning and holding assets, including commercial property, within pensions.

The content of this article is for information only and does not constitute formal financial advice. This material is for general information only and does not constitute investment, tax, legal or other forms of advice.

You should not rely on this information to make, or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation.

Kreston Reeves Financial Planning Limited, Independent Financial Advisers. Authorised and regulated by the Financial Conduct Authority.

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