Property Pensions

For many individuals involved in property development and investment, the concept of investing into a pension plan to help meet a retirement objective is rarely at the forefront of their mind.

However, modern pension arrangements are far more flexible than their predecessors. They offer a valuable suite of tax benefits to individuals, including:

  • Corporation tax relief on company pension contributions
  • Personal tax relief up to an individual’s highest marginal rate on personal contributions
  • Tax free returns on investment
  • Value of the pension assets falling outside of an individual’s estate for inheritance tax

How does it work?

With today’s low interest-rate environment, more and more individuals have old pension pots that are deemed ‘frozen’, and in their eyes, adding little value.

It is worth considering the merits of transferring these old pension pots to a new scheme that allows commercial property purchase. Prior to doing this, it is sensible to review the benefits you may be losing by transferring the pension.

Should a transfer proceed, an employer could then make a lump sum contribution from their business, obtaining some beneficial corporation tax savings.

Using the combination of the transferred pension benefits and contribution from the company, it is possible to purchase, or even part purchase, a commercial property with the monies held in the pension.

Once a purchase is made, another possible step is to arrange a lease from the pension fund (which now owns the building) back to the company paying a regular commercial rent.

What types of commercial property can I purchase?

There are a variety of commercial properties that you would be able to purchase with pension funding. These include:

  • Shops
  • Restaurants
  • Pubs
  • Office blocks

What about buying residential properties?

While you can technically purchase a residential property (such as buy to let property) with your pension fund as well, this would result in substantial tax charges being applied by HMRC, which makes the direct purchase of residential properties financially unviable.

Further information about Property Pensions can be found in Issue 16 of MHA Carpenter Box‘s newsletter Real Estate Matters.

Read Real Estate Matters Issue 16

For the best financial outcomes, it’s advisable to speak with a pensions expert before you make a final decision. Coole Bevis Wealth Management can help in determining the right steps for your personal circumstances.

For further help and advice regarding your pension, please contact our team.

The Financial Conduct Authority does not regulate some Buy to Let mortgages or Tax Advice.