How Can Pension Schemes Be Used To Invest In Property?

It is not widely known that you can use your pension to build or expand a property portfolio. In fact, even those who thought it was possible to invest in property using their pension have been told ‘it’s not possible’ by a pension specialist. When met with such black and white answers, it’s easy to see how many people are missing out on this powerful investment strategy. With seemingly little expert knowledge available on this specialist topic, we’ve created this article to set the facts straight and give you an introduction to exactly what’s involved and more importantly, exactly what’s possible.

Understandably, there are several complexities involved and everybody’s individual circumstances are unique, but the fact remains – it is perfectly allowable to invest in any kind of property using your pension fund, as long as the scheme is properly structured, implemented and maintained.

This is great news for anyone dreaming of owning investment property, wanting to boost their retirement income, or create multi-generational wealth to improve their family’s lifestyle now and in the future.

The Opportunity

Generating an income from investing in commercial or residential property is something many of us aspire to, but lack of liquidity can mean our dreams never get off the ground. The opportunity to transfer money out of your company and/or private pension(s) to invest in property, not only gives you the funds to be able to reach your property investment goals, but it also has the potential to substantially boost your pension pot. A recent client of ours used this exact strategy with great success;

“I gave up a projected combined pension of £8,000 per annum at the age of 60 and received instead a “transfer value” of £398,000 which I invested through my SIPP into UK commercial property. The first property I ever bought gave my SIPP £25,000 per year, which massively grew my pension pot”

(Read our client’s story in full and understand more about the complexities and opportunities surrounding pensions in this book)

So how does it all work exactly?

Pension Structuring

To be able to get started furthering your property investment goals using your pension fund, you first need to ensure you have a pension scheme that is structured appropriately to allow you to invest into real assets such as property, private lending and private company shares. This step is necessary for most people, as typically, most pension schemes are not structured correctly for investing into property.

Suitable pension schemes typically include a SIPP (a Self-Invested Personal Pension – essentially a do-it-yourself pension which gives you complete control, allowing you to consolidate your pensions into one pot and invest into a wide range of assets, of which property is one), or a SSAS (Small Self-administered Scheme – a type of defined contribution pension scheme usually set up by business owners and can include family members). This type of pension scheme allows you to pool funds with other people (a maximum of 11) giving you a bigger pot to invest with. A SSAS can also borrow money for investment purposes (vie a mortgage for example).

Essentially, SIPPs and SSASs offer greater control and flexibility than standard private pension schemes and it’s these added benefits that make property investment a possibility.

Whilst the above is a highly simplified explanation of the process, it does highlight the opportunity that many are missing out on purely through the mis-information and lack of understanding on this specialist area.

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