With the news constantly telling us that we are not saving well enough for retirement, and concerns about the future of the state pension, investing for the future is a hot topic. Many SIPP and SSAS pension schemes offer flexibility in terms of what you might choose to invest in to grow the value of your pension, and can offer some appealing tax benefits. One of the assets that is often seen as a good investment is Property – but how easy is it to invest in Property with your pension? And are there any difficulties?
Amanda Read, Commercial Property Partner and head of the Pension Property Investment Team at Coffin Mew, offers us her insights into some of the property process:
Can I put any property into my pension?
There are some restrictions. Firstly, residential property cannot be held in most pension schemes. Secondly the Property does need to be an investment. This means that it needs to be worth what you pay for it. It also usually needs to have an income – eg. a lease in place with a tenant paying rent. That tenant could be yourself, your company or someone wholly unconnected.
Careful checks will need to be undertaken by TPSG to ensure that there are no legal issues affecting the property that might adversely affect its value now, or in the future. That’s where Coffin Mew get involved.
TPSG will be able to let you know their restrictions or requirements for investing in a particular property. We’d also recommend speaking to your financial advisor to make sure that this type of investment is right for you.
What is the process?
The process for purchasing a commercial property into a pension scheme is very similar to that for buying a house. TPSG need to know that the property can be easily sold for its value in future. They will want valuation advice. They will also want solicitors to review the title, conduct searches and obtain replies to enquiries from the seller. This will make sure any issues are dealt with before they purchase the Property – protecting the value of your pension fund.
If the property does not have a lease in place, a new lease will usually need to be agreed with the tenant and be ready to put in place on the day the purchase completes.
How long does the process take?
This can depend on a number of factors, including how complex the title for the Property is, how quickly information can be obtained from the seller, how long the local authority take to provide searches and planning documents and whether consents might be needed from any third party. It is difficult to take commercial views on issues with a property being purchased into a pension, as that can mean reductions in value, so things need to be dealt with properly. We would usually expect the process to take around 8-12 weeks from receipt of a contract pack. However, it can be much quicker if all parties work together.
What are some of the common property issues that might delay matters?
Things like the seller not having planning and building regulations consents, missing title documents, or missing statutory documents can delay matters whilst they are dealt with. If common areas of an estate are managed by a management company, with service charges payable, then obtaining information or consents from the management company so the property can be transferred can take time. Some issues we can protect against very quickly with indemnity insurance, or enquiries of certain authorities, but others do have a process that we need to follow. The quicker we receive title and replies to enquiries, the quicker we can work out what we need, and how quickly we can deal with that.
Can I help speed up the process?
Often you can. If you are selling your own property into your pension scheme, you can make sure you supply as much information about the Property as possible. For example, you can make sure you have an EPC, fire risk assessment and asbestos management survey. You may also have access to planning paperwork or guarantee documents for works carried out. Providing these early on will ensure matters can proceed quickly. Talking to us throughout the process can also really help. You may have useful information that you can provide to us that we would not otherwise know about.
Can I borrow money to fund the purchase?
Usually yes – you can generally borrow up to 50% of the value of your pension scheme (not the Property value). TPSG and the lender will be able to check your borrowing limits for you. There are a number of lenders on the market who have specialist teams who are used to dealing with this type of lending and can guide you through that process.
What if the property I want to buy is mixed commercial and residential?
It is probably still possible to buy the property – however it will take some careful structuring. TPSG can usually only buy the commercial part. If you are prepared to buy the residential part of the Property yourself, a long lease can usually be put in place for the commercial unit to enable that part of the Property to be transferred to your pension. You can then buy the remainder of the building. It requires some extra – very carefully drafted – documents, but it can be done.
What about transferring a property to TPSG from another pension scheme?
The process for transferring a property to TPSG from another trustee is very similar to the purchase process. We can usually dispense with a few documents, but generally we’ll be checking that if you move this property to TPSG, they know it is still a good investment.
Teamwork
One of the best ways to make sure transferring a property into a pension scheme is a quick and hassle free as possible is for everyone involved in the process to work together as a team. Coffin Mew and TPSG have been working together for nearly 10 years, and between us there are not many property issues we haven’t come across. We like talking to each other, and working through any niggles in the property process is a joint effort. We’ll do everything we possibly can to help the transaction through as quickly and as simply as possible. Not all issues are easy to deal with, but we’ll always try our best to find that miracle answer where we can.
