Thursday, 22 September 2011

We pooled our Pensions and Bought the Building!!


Two things that are guaranteed to raise the hackles of any businessmen are pensions and landlords. So when we found that we could use one to eliminate the other it seemed too good to be true.

Take my firm as an example - Like most people we had bits and pieces of pensions floating around, all three directors had funds from previous employers and we reluctantly knew we needed to make provisions for our future.

At the same time as we were looking at pensions we had an option to buy out our landlord. To be frank this was something we were keen to do.

Being financial advisors we were well aware that in certain cases you could use pension funds to invest in or buy property so the research began. The answer turned out to be remarkably simple, bring together our frozen pension funds into a Self Invested Personal Pension (SIPP for short), pool our resources and invest them in our building. Our joint funds made up two thirds of the purchase price of the building, but SIPP rules allowed the scheme to borrow up to 50% of the funds value, meaning that we could afford to buy the landlord out.

We still pay rent, but now we pay it to our own pension scheme, we are our own landlord and the arrangements have proved to be very tax efficient for us. Since doing our own SIPP we have helped a number of clients put similar schemes in place.

SIPPs are not just for buildings, they are subject to the normal rules and regulations for registered pension schemes, but offer freedom of choice over investment management, and strategy whilst keeping the administration simple. This means that you are able to change investment managers when you wish, without incurring the expense of changing the provider. You are free to give direct investment instructions and most types of conventional investments are freely permitted including quoted stocks and shares, unit trusts, insurance policies and commercial property but there are some restrictions designed solely to prevent abuse,

A SIPP can be complex and you need to understand the risks so you need to seek independent advice from a suitably qualified advisor, if you feel that a SIPP might be for you give us a call on 01778 342291 for an initial chat about the possibilities.