SIPP Property explained



One of the key features of a Self Invested Personal Pension, commonly known as a SIPP, is the ability to identify and acquire specific property investments. This option allows individuals to use their own knowledge and personal contacts, to access unique property investment opportunities and significantly enhance their retirement assets.

It is important to note that SIPP property purchases should be treated individually and it is rare that any two are ever the same. This point may sound obvious, but considering the way the majority of SIPP providers approach SIPP property purchases, individuals could easily be forgiven for thinking that all investments are the same.

A SIPP Property investment allows the individual to control what the funds are invested in and with the government giving up to 50% tax relief on all contributions into a pension plus giving you the ability to borrow inside of the SIPP, this option is rather appealing. The investment into commercial property as part of a Self Invested Personal Pension can be seen as a one of the most tax efficient investments around when done correctly.

A few of these tax advantages and a number of other associated benefits are outlined below:

• The growth of the property will be free of capital gains tax and it will be free of inheritance tax on death.

  • 50% of the total value of the Self Invested Personal Pension can be borrowed.

• Any rental income an investor makes from the property will be paid directly back into the SIPP fund free of tax. This allows the pension pot to grow further.

Case Study

The example below further demonstrates these benefits:

The SIPP has total assets of £200,000 in investments, all of which can be readily used for investing in a property. The property is valued at £250,000. The borrowing is restricted to a maximum of £100,000 (i.e. 50% of the £200,000), which means that the SIPP can raise a total of £250,000 towards the purchase of the property (the existing fund value plus the additional £100,000 gained through the borrowing).

If you’d like to find out more on SIPP Property investment, Liberty Pensions have developed the most flexible property purchase structure in the market. Visit the Liberty Pensions website for a range of SIPP solutions.