The Property Pension Guide
Written by John Charles Property Investments
If you don’t understand your pension then transfer it into Property for tax free returns.
The myth that hangs over transferring your pension into property often relates to cost, complexity or ‘it’s just not possible’ so this short guide intends to set the record straight.
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Buying property with your pension has been possible since 1989 but there were many restrictions at the time (perhaps this is where the myths arise from…). However in 2006 the government changed legislation again to allow a much broader range of property investments. The changes paved the way for pension investments in things such as purpose built student accommodation, hotels and care homes. We’ve even had clients invest in car parks, development land and of course the traditional form of property.
A property pension is officially known as a Self Invested Personal Pension (SIPP), and they are readily available in do it yourself form via the internet. Gone is the time when you had to employ an IFA at substantial cost, SIPP providers are quite happy to take you in as a ‘direct’ client potentially saving you thousands in charges. There’s also a lot of competition between the SIPP providers so if you’re researching, look online for comparison tables to see what other ‘fringe’ benefits you can get.
So how do you set about getting out of a traditional pension and into property on your own? ‘It’s just not possible…, and it’s so expensive’ we hear the cry….. The truth is that you can set up a property pension from as little as a few hundred pounds, and don’t worry this doesn’t come out of your bank account, your pension fund pays the fee. As for the complexity of it, well there are plenty of property pensions to choose from and actually they are pretty simple to understand.
Look at it like this, your pension money is held in a restricted bank account and switching to a property pension account is not really any more difficult than changing current accounts.
If you currently have a traditional pension then it’s likely that the money in the pension has been transferred out and invested into the stock market or a fund with the hope (and it is just hope because we’re not all Warren Buffet) of getting you a decent return. To set up a property pension (SIPP) you simply tell your existing pension provider to transfer your pension money from your existing pension bank account to the new pension bank account. You can then start to look at what type of property you feel is right for you.
‘But what about my tax benefits?’ Don’t worry, these all remain, a property pension still gets all the benefits of a traditional pension but you just have the flexibility over investment choice.
So why wouldn’t you transfer to a property pension? It still gives you the option to remain diversified and invest in the stock market (if you know what you’re doing) in addition to investing in property, so you can do both at the same time.
It’s even possible to invest in property with as little as £30,000 in what is known as fractional ownership. It’s a good starting point for people with lower value pensions and gives you the chance to own a share of a property. If you’ve got close family or work colleagues, you could even combine all of your pensions to give you greater buying power, we often see this where a group of people have a project in mind or a husband and wife want to combine their pensions to make a joint investment. This is a little bit more complex but help is at hand.
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John Charles Property Investments has been a Premier Partner of Rightmove for over 2 years and regularly provide comment on the property and pension market. We are experts in this field and have helped many clients access property investments with their pension here in the UK and often abroad.
