Property Purchase through a pension scheme is a very tax efficient way of buying commercial property.
This can be done either in a SIPP (Self Invested Personal Pension Plan) or SSAS (Small Self Administered Pension scheme) A SIPP is a personal pension scheme open to all people. A SSAS is a pension trust set up by a company, typically for the benefit of controlling directors and their families.
For both types of scheme, rent from the property is free of income tax, and capital appreciation of the property is free from capital gains tax.
SSAS can make a loan of up to 50% of the net fund value to its sponsoring company for the purchase of a property, which is an excellent feature.
HMRC does not list properties allowed in SIPPs/SSAS. Instead, it defines properties that would attract taxes, in practice, residential properties and tangible movable assets.
There are many more SIPP providers than SSAS providers. Some have vast experience of property purchase, some have not.
As experienced advisers in property purchase, we will go through with you the pros and cons of purchasing with your pension fund, purchasing as individuals, or a mixture of the two.
Pensions Simplification
‘A’ Day (Appointed day) happened on 6th April 2006 and brought with it some major changes for all pension plans – whether occupational or personal.
There are now just one set of tax rules for all types of pension, with an individual Lifetime Allowance (£1.030 million – 2018/19 rising to £1.055 million 2019/20) and an individual Annual Allowance (£40,000 – 2018/19). All individuals will be able to fund up to these new attractive limits. Schemes already in existence before this date will need to update their rules to allow some of the new flexibilities.
Exceeding the limits may trigger a tax charge. Protection may be obtained please get in touch to discuss your specific options.
Most customers now have greater flexibility in the size and timing of their contributions.
Key points:-
- The earliest age at which retirement benefits can be drawdown is 55 years.
- Full concurrency (i.e. being able to pay into any array of plans you wish), subject to the annual allowance
- Wide investment flexibility
- 25% Tax-Free Cash will be available from the majority of pension schemes.
- The ability to commute a ‘small’ fund as a one-off lump sum as opposed to having to draw a regular income.
- Flexible options at retirement when deciding to take benefits
- No need to ‘have to’ secure benefits at age 75 via an annuity
We will be happy to discuss and advise you on your retirement planning, please contact us to arrange a visit
