We look after your pension needs allowing you to do what you do best.
Fresh from discovering that you can buy or invest in property using your pension, you have identified the perfect premises only to establish that your pension doesn’t have enough ‘cash’ to buy that property outright.
You will be pleased to hear that it is possible for your pension to borrow money.
As you would expect with pension rules, there are, of course, restrictions here, arguably the main one being that your pension can borrow a maximum of 50% of the gross value within your pot.
If you currently have, say, a pension worth £200,000, in principle you could borrow up to £100,000 and therefore buy a property worth £300,000.
Given that most lenders will usually want to lend less than 100% of the value of the property – 70% being a yardstick – the fact that you are borrowing a maximum of 50% of the value of your pension is likely to cover this without problem.
Lenders will, of course, also look at serviceability of the loan. Assuming that your trading company is renting the premises from your pension, the rent that your business pays to your pension will need to cover the loan repayments and the other overheads costs of the property. These will vary depending on the terms of the lease put in place, but could include items such as utilities, insurance and maintenance costs.
In very general terms, based on you paying a market rent and borrowing 50% or less of the property value at a reasonable interest rate, there should be sufficient rental income to ensure that you can repay the borrowing within 15 years, with adequate ‘slack’ to make lenders comfortable.
To summarise, the legislation and regulation allowing pensions to borrow up to 50% of the value of the pot, normally means that such a proposition gives acceptable security and serviceability cover to lenders.
We always recommend that you take professional advice before making a major financial undertaking of this magnitude.
For more visit
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