Pension Scheme Property Purchase

Pension scheme property purchase

Before advice from OCM Wealth Management Ltd

Our client is a small Limited Company called ABC Ltd with three shareholders. The company owns a commercial property from which the business is run and they would like to raise some money for business expansion.

  •  he property is professionally valued at £1,200,000
  • The three directors all have pension funds valued at £500,000 each
  • These are currently invested with various pension companies

How we helped ABC Ltd

  • With the advice and assistance of OCM Wealth Management Ltd each director sets up a SIPP (Self Invested Personal Pension) and transferred in their existing pension funds
  • The SIPP trustees were instructed to purchase the property
  • ABC Ltd sells the property to the Trustees so that each individual SIPPs then owns a one third share in the property. The remainder of the SIPP funds are invested to meet the objectives of each individual director
  • ABC Ltd then leases the property from the SIPP Trustees and pays a market rent
  • The company continues to pay regular pension contributions to the SIPP

The benefits to ABC Ltd

  • ABC Ltd now has the proceeds of the sale to use for business expansion (if the trading circumstances of the company were not so good this could have ensured the survival of the business in difficult times)
  • The rent paid does not go to a commercial landlord but is put back into their pension scheme
  • Whilst the property is owned by the pension any growth in value of the property should be tax-free
  • The rent paid should be tax deductible for the business and is received tax-free by the SIPP
  • The pension contributions should also be tax deductible for the company
  • There may be other advantages to having the property in the pension fund such as protection from creditors in the event of insolvency