1107 Focus Spring 2020 Print - Page 33

property as
pension asset
is this a good
by Emily Small
chartered financial planner efa and director
of richard jacobs pension and trustee services
For most, your pension savings are invested in
funds, where a fund manager at your pension
company makes the investment decisions on your
You can choose to hold physical property in your
pension. This can only be certain types of pensions
called self-invested personal pensions (SIPP) or
small self-administered schemes. It is rare that a
workplace pension will allow this option, although
you could see your money invested in property
An example of how it works:
Richard Jacobs has a SIPP which owns 13 Brindley
Court. Our company rents the property and this
rent is paid into the pension.
Disadvantages of holding property in a pension

Property is illiquid, not easily realisable.

All valuations must be at market values, e.g.
you cannot inflate the rent paid from your
business into the pension

Costs are normally higher than holding the
asset outside of a pension

Void periods – if you are taking the rent back
out as pension income, income may need to
cease, or you are forced to use other assets to
keep paying your income.

Forced sale – the pension provider must have
your future pension income as a priority, they
can force the sale of property with long void
periods if they believe this is in your best

Each time you access new benefits from your
pension, post age 55, a valuation must be
completed at a cost to the pension funds.

As you are holding significant funds in one
asset, this is classed as a higher risk investment.
Advantages of holding property in a pension:

Growth in your pension fund from the rent

If purchasing the property from your business
this can release funds into the business.

Rent goes into your pension rather than to a
third party

Rental income can be withdrawn as income
Potential growth in the capital value of the
Most costs can be paid from the pension
scheme, including solicitor fees, but not
renovation specific to the tenant.
At the point you come to take pension
benefits you need to ensure there are enough
investments outside of property to enable the
payment of any tax-free cash or income.
All income and gains within pension schemes are
exempt from income tax and capital gains tax (CGT)
so any rental income is not subject to income tax
nor will CGT be payable on the sale of the property.
As with any investment we suggest you speak to a
qualified pension specialist before you act.


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