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Property speculating is defined as buying or holding property based on the belief that the capital value will increase.
There are not quite the same opportunities as the days of the early American prospectors but, nevertheless, buying land with development potential can still be a viable method of achieving investment growth. In view of the housing shortages and potential relaxation of planning rules, land speculation can be seen as a real opportunity.
Nationwide property websites, for example rightmove. co.uk, highlight plots of land or properties such as old barns, community buildings, follies or even small castles, that are available for sale. Many will not have planning permission for any development, but that is not to say that permission won’t be granted in the future. There are thousands of examples of people with an eye for a great opportunity turning a once redundant building into a dream home. Is it time to consider transforming that hillside derelict property with the stunning views?
Once a property has been identified you can instruct your SIPP or SSAS provider to complete the purchase and it can be held in your pension fund until an opportunity arises that will increase its capital value.
Phil understands that lack of housing supply will likely result in some previously protected areas of land being earmarked for potential development. He notices a five-acre plot of land on the outskirts of his home town has come on the market for £50,000. In order to accommodate the increase in the town’s population Phil speculates that this land may receive planning permission for the construction of a number of houses. He approaches his SIPP provider who arranges for the land to be purchased by his SIPP.
A couple of years later a development company has received preliminary planning permission from the local authority and has approached Phil to negotiate a purchase of the land. As the planning permission is likely to be granted, the value of the land has increased significantly. Phil decides to sell the land to the developer for an agreed price of £100,000 and the SIPP enjoys a healthy profit of £50,000.
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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