We look after your pension needs allowing you to do what you do best.
If you are a business owner with a company that owns its own trading premises then this property can be sold to your pension scheme. Your company can then benefit from a valuable cash injection into the business.
Alternatively, if you are business owner that does not own the property that you trade from, you may not realise that you may have the means to acquire the premises by using your pension fund.
Imagine the advantages of being the property owner rather than the tenant. No longer bound by uncertainty of lease renewal and landlord constraints. You could enjoy complete freedom and security of property ownership with all the rent going to your own pension fund instead of to a landlord.
In both instances you continue trading from your premises and pay rent direct to your own pension scheme. Not only that, but your property has complete security as it will generally be protected from any future creditors.
You will need to set up a SSAS or a SIPP (a relatively simple process) and transfer in your existing pension benefits. Either of these can be used to fund the property purchase. Alternatively, if your business owns the property, ownership can also be transferred into the pension scheme as an in specie pension contribution (this is a fancy name for a pension contribution that is an asset rather than cash). This not only increases the value of your pension fund, but also allows generous corporation tax relief for the business.
Geoff and his brother Steve have a business which manufactures machinery parts. The business owns the factory and the premises have recently been valued at £300,000. The brothers’ pension schemes have a value of £180,000 each. These are put together into a joint SIPP or SSAS and the pension scheme buys the property from the business with the remaining pension fund invested.
The company now pays the pension scheme a market rent of £21,000pa for the use of the factory.
The business has received a cash injection of £300,000 and the pension scheme receives a tax free annual rent of £21,000.
Carly runs a successful gift shop in the High Street. She currently pays rent of £1,200 per month to her landlord. The landlord, who is an investor, decides to sell the premises for £150,000. Carly discovers that the value of her pension fund is £150,000 and decides to use this money to buy the premises after transferring her existing personal pension into a SIPP. Her business continues to pay £1,200 per month for the rent, but this is now being paid straight into her own pension fund.
Across the road, Dave’s café has also come up for sale for £180,000. He realises the advantage of owning the property in his pension fund and particularly likes the idea of paying the monthly rent of £1,400 straight to his own pension, rather than to a landlord. Unfortunately, Dave’s pension fund is only worth £140,000. However, his adviser tells him that by transferring his pension savings into a SIPP or SSAS, his fund can be used to obtain a mortgage to meet the shortfall. A mortgage of £40,000 is arranged and the pension fund buys the property for £180,000. The pension now receives monthly rent of £1,400 and pays £320 for the mortgage*
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This is for UK intermediary, broker and adviser use only – it is not for use with retail clients
This information reflects the regulatory and taxation situation as it affects pensions at the time of publication in April 2017 and is provided to the best of our knowledge. It is not a complete representation of the pensions legislator landscape and is for guidance and information purposes only. We cannot be held responsible for any errors, omissions or subsequent legislative changes.
For further information on your pension scheme administered by Morgan Lloyd, or any enquiry, please do not hesitate to call and one of our team members will be happy to helpView more