What is a Self-Invested Personal Pension (SIPP)?
SIPPs are fundamentally the same as a Personal Pension (PPP) but provide greater investment flexibility which can include commercial property investments such as offices, shops and factories. They have identical tax treatment to Personal Pensions, the limits on contributions are the same, the tax relief is the same and they have the same flexibility in retirement.
SIPPs are generally sold when you want an element of flexibility over where your money is invested as part of an overall investment strategy. Many SIPP providers allow access to virtually the whole market of assets within your SIPP, giving considerable flexibility with how your money is invested. Personal pensions, on the other hand, are often limited to a restricted investment fund range.
Using your SIPP to purchase commercial property
A big attraction of a SIPP is that you can take out a mortgage within the SIPP to help you buy commercial property for investment purposes. This can include your own company’s office, factory or shop. SIPPs can borrow up to 50% of their value allowing you to buy a property worth £150,000 with only £100,000 of pension savings. If you pay tax at (40%), a £60,000 contribution will enable you to buy a £150k property within the SIPP. All rental payments will come into your pension tax-free and you can either keep the property when you retire within the SIPP and utilise the rental income as part of your retirement income or sell the property and use the money to provide you with an income.
The importance of seeking professional advice
Eastcote Wealth Management has years’ experience in this area and can help you to access the pension options available to you and help you to maximise your pension on retirement. Please be careful with your hard-earned pension savings and think very carefully before cashing them in or moving them. If you’re offered a scheme which seems too-good-to-be-true, it probably is. For further information, see www.pensionsadvisoryservice.org.uk/pension-problems/making-a-complaint/common-concerns/pension-scams.
Please do not hesitate to contact us if you would like to discuss your retirement options in more detail. Remember, we offer a free no obligation consultation and will be happy to help if we can. We take a holistic and long-term approach to wealth management, opting to build a lasting relationship with you and provide a tailored solution for all of your investments.
A pension is a long-term investment. The fund value may fluctuate and can down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Occupational pension schemes are regulated by the pensions regulator.