True Sipps (self-invested personal pensions), sometimes referred to as full or bespoke Sipps, remain wonderfully versatile tools.
The list of generally permitted investments has evolved over the past few years, and problematic assets, such as non-standard and unregulated types, are typically no longer allowed within them.
In the main, this means that commercial property is the primary asset for these true Sipps.
It creates a real opportunity for business owners, but the vast majority of that opportunity remains untapped.
One of the main challenges facing small and medium enterprises (SMEs) today is access to funds.
5.5mn
The number of private sector businesses in the UK at the start of 2024 was 5.5mn.
Whether it is to address a temporary cash flow issue or to invest in the growth of the business, it can be a difficult and complicated process.
For many business owners, there is a solution that they may not be aware of: placing business premises in a Sipp.
When the tax advantages of Sipps are combined with the investment case for commercial property, it is a compelling argument to access the value to benefit the business.
Commercial property is premises such as offices, commercial land, retail and industrial units. It does not include residential property, which means that business owners working from their own home do not qualify.
In this piece we will explore the following topics:
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What is the opportunity? – How widely known is ‘property in pension’ in the business community? How big is the opportunity for planners?
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It is all about managing tax efficiently – The various benefits of placing property into a pension.
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The ‘how to’ – How to create liquidity in a business using a Sipp.
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What are the outcomes? – How does this benefit the business, the client and the planner?
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Suitability – Is placing business premises in a Sipp the right option for your client?
Property in pension is not as widely used as it could be, in many cases.
Most enquiries are client led, often referrals from other professionals, such as accountants, solicitors, etc.
In fact, when looking at raising extra funding in a business, most clients will look to other mainstream sources, not realising a Sipp can provide a tax-efficient solution.
What is the opportunity?
There have been various surveys to business owners over the years that ask how many own their premises.
Most of these show that approximately two-thirds own one or more properties.
In almost all instances, these properties were purchased using either personal or business funds, often with bank support too.
Oddly, very few respondents confirm the involvement of a pension, be it a Sipp or SSAS (small self-administered scheme).
In the wider business market, using a pension to purchase property is not commonly thought of, but there is an advice opportunity for these business owners.
