How friends targeted tax-free growth on the High Street

Two friends looking to make their money work for them found the answer in bricks and mortar – but not by following the traditional property development route.

Follow John and Robbie’s story as they unlocked the significant investment potential and capital growth opportunities of the local High Street to grow the value of their pension savings irrespective of the fluctuations in the market.

Why did you choose commercial property ownership?

We wanted to invest in quality commercial property to take advantage of consistent tax-free growth on our capital investment and also benefit from tax-free rental income within pension schemes.

What was the attraction investing in the local High Street?

We chose established High Streets in small towns because there are fewer major brands and more independent businesses.

We wanted to avoid a break in rental income for any significant period of time. If one of our tenants moves out, there is a high demand for a retail unit in a desirable location.

One of the properties we purchased was in the Bath and North East Somerset village of Chew Magna and includes the local post office, a gift shop and an estate agent.

What research did you do before agreeing to buy?

By pooling our resources instead of purchasing individually, we were able to buy higher quality properties, spread the risk across more properties and also reduce costs such as stamp duty and solicitor’s fees.

We did our own due diligence on the existing tenants. We looked at previous business performance, location, expected rental income and existing lease agreements.

And, of course, we agreed the purchase prices.

How did you go about accessing your pension savings?

We started out by setting up a Syndicated Morgan Lloyd SIPP (Self-Invested Person Pension) with both of us as members. Each of us also set up an individual SIPP.

Did you finance the purchases yourselves or use other funding?

We took out a joint 15-year repayment mortgage within the Syndicated SIPP to help with the purchase of the properties.

The mortgage is secured against the commercial properties which meant we didn’t need any additional personal guarantees.

There was also no impact on our personal mortgage situation because the commercial property mortgage is in the name of the SIPP.

Let’s talk hard cash – how did you pay for the properties?

Each of us transferred our existing pensions into our individual Morgan Lloyd SIPPs. This gave us greater control of the funds and we then transferred funds into the Syndicated SIPP to supplement the repayment mortgage and bought the properties.

What are your expected returns from your investment?

The rental income from the commercial properties will more than cover the mortgage repayments and should produce extra income. Also remember the amount of mortgage we owe reduces over the 15-year term.

Looking to the future, how is your money going to work for you?

We can transfer the extra rental income to our individual SIPPs and then reinvest that income into traditional platform investments depending on the level of risk we want to be exposed to.

When it comes to retirement, what choices do you have?

As we see it we have two obvious options.

Option 1: Sell the properties and take the proceeds via an annuity or drawdown to provide retirement income.

Option 2: Retain ownership of the properties and use the rental income to help fund a retirement income.

You should seek professional financial advice before investing in commercial property


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.