Pensions vs property investment: A combined approach

Any sustainable retirement plan should have redundancies built into it. That is why many savers choose to not only invest money into their pension but also property as well.

Recent research shows that the number of people intending to use property to provide a retirement income is on the rise.

However, many of the advantages of buy-to-let (BTL) investments have been watered down by progressive action by the Government, including recent changes to the Capital Gains Tax (CGT) thresholds.

Does this mean that investors should shun BTL as part of their late-life planning? Rather than withdraw entirely from the idea of property investment there are ways of directing a SIPP (Self-Invested Personal Pension) or SSAS (Small Self-Administered Scheme) to invest in property – albeit commercial rather than residential.

Venturing into commercial property through your pension creates several enticing tax benefits worth consideration. These include:

  • Exemption from Income Tax on rental income received by the pension.
  • Enjoyment of tax relief on contributions made into the pension.
  • Freedom from Capital Gains Tax on property sales executed via the pension.

For clients whose business is also their tenant, the rent could also be subtracted from the business’s trading profits, potentially leading to Corporation Tax savings.

You may be taken aback by the flexibility and long-term investment potential that SIPPs and SSASs lend to commercial property investment.

Besides the tax benefits, they can also serve as a potent tool to nurture your pension in preparation for retirement.

However, key considerations await anyone contemplating the use of their SIPP or SSAS for commercial property investment.

If you are interested in learning how you can invest in commercial property via your pension, please speak to us.