Origen has seen an increase in company directors, solicitors, accountants and other professionals seeking to purchase a property often to lease to their own business or as an investment property leased to a third party.
The rules on SIPPs allow individuals to have as many pension schemes as they wish and provide them with tax efficient investment schemes. However, the changes to borrowing rules in SIPPs from April 2006 have meant that it is now harder for individuals to gear up sufficiently to purchase commercial property.
Whereas previously SIPPs could borrow up to 75% of the purchase price and therefore would only need to have 25% available as a deposit, the maximum borrowing has reduced to 50% of the existing fund value.
The benefits of buying a property through a group SIPP are:
- the pooling of more than one person’s pension benefits to purchase an asset,
- the ability to gear up through borrowing to purchase property,
- the property grows free of income tax and capital gains tax,
- only dealing with one SIPP administrator,
- the group gets competitive terms
“One word of warning though, those entering into a group SIPP to purchase property need to be aware that these investments are relatively illiquid and may take time to sell. This is particularly relevant where one member wishes to sell his share of the property and the others don’t.”
