Buying a Commercial Property with your pension fund is an area of financial advice that we are often involved with. There are many reasons why this can be a good (and sometimes not good) thing to do.

To help you work out if this type of pension investment might be suitable for you take a look at the following short case study of actual cases we have advised on.

Case Study 1

Mr & Mrs Client each have a various pension funds adding up to about £75,000 each which they are no longer paying money into. They run a small retail business and rent premises for £20,000 per annum off Mr Landlord. Similar premises next door have been put up for sale for £200,000. They approached their business bankers for a business loan to buy the property but were put off by the need for a deposit of £70,000 (35%).

They decided to combine their pension funds giving themselves a combined pension pot of £150,000. Their pension funds then borrowed a further £50,000 from a High Street bank enabling their pension funds to buy the premises next door.

They served notice on Mr Landlord and then moved their business next door. They signed a new 6 year lease with their pension funds who are their businesses new landlord. They still had to pay £20,000 per annum rent but now it was being paid to their pension fund rather than a third party landlord.

There are some other potential benefits too such as pension fund assets being protected in the event of business bankruptcy.

There is a lot more to consider when considering this kind of pension investment. For instance, do you use a Small Self Administered Scheme (SSAS) or two Self Invested Personal Pensions (SIPP) as the pension vehicle? Which banks will lend to pension schemes and what is the best rate? How does the pension scheme pay retirement benefits? What happens in the event of death etc?

If you are interested in buying a commercial property with your pension fund please contact us for further guidance.