Can I Transfer my Fire Service pension into a SSIP

AASFSLTD

I have 10 years contributions into the NFPS, however i have chosen to take a different career path. I started my own business 3 and a half years ago, which is doing well considering the current financial climate i now want to purchase a commercial property. I am unsure of what path to take and how and if it is an option to use this money i have contributed. I don't want to just leave the money sat until i am of a pensionable age and i would like to invest it in commercial property.

Any help would be appreciated.

Annisele

Do you have a specific commercial property in mind (i.e. the one you're trading out of)?

If you do, then I'd say that transferring out of the fire service scheme is probably a bad idea. If you don't, then transferring out is almost certainly a bad idea.

Moving money from a final salary scheme to a SIPP usually requires an IFA to sign off on it. Since it's almost always a bad idea, it can be hard to find such an IFA.

dunstonh

Can I Transfer my Fire Service pension into a SSIP

An IFA would be required to sign off on it. When you consider that 99% of the time a transaction would be bad advice, you will probably find it hard to persuade an IFA to do it on advice basis requiring you to overrule them and the IFA is likely to charge a lot for that.

I don't want to just leave the money sat until i am of a pensionable age and i would like to invest it in commercial property.

Why do you want to put it into something that is almost certainly going to be a lot worse?

thecopshop

AASFSLTD wrote: »

I have 10 years contributions into the NFPS, however i have chosen to take a different career path. I started my own business 3 and a half years ago, which is doing well considering the current financial climate i now want to purchase a commercial property. I am unsure of what path to take and how and if it is an option to use this money i have contributed. I don't want to just leave the money sat until i am of a pensionable age and i would like to invest it in commercial property.

Any help would be appreciated.

I have been self employed for over 20 years , purchased a commercial office in a sipp about 10 years ago. Probably the best investment I have ever made. In terms of purchasing the office, the basic sipp rules state that you can borrow up to 50% of the value of your current pension when transferred into the sipp. One of the best things about the sipp rules , is that you could actually use your business as a paying tenant. Your buisness would have to pay a commercial rent, but all this rental income would effectively be paid into your sipp. Another reason I would recommend investing in commercial property , is that as an investment the freehold value at the moment is actually really low because of the economic situation. This means that is probably one of the best times to buy commercial property. Don't let anyone put you off the sipp route as a pension investment as the way I look at it, you're trusting your own judgement in terms of pension investment instead of some faceless city investment broker that more often than not will possibly loose you money. I was lucky enough to start with a £40k inital pension investment which has grown approx tenfold over 10 years without me paying any more into the pension pot. This growth has come from paying tenants on this office property .

GhIFA

thecopshop wrote: »

I have been self employed for over 20 years , purchased a commercial office in a sipp about 10 years ago. Probably the best investment I have ever made. In terms of purchasing the office, the basic sipp rules state that you can borrow up to 50% of the value of your current pension when transferred into the sipp. One of the best things about the sipp rules , is that you could actually use your business as a paying tenant. Your buisness would have to pay a commercial rent, but all this rental income would effectively be paid into your sipp. Another reason I would recommend investing in commercial property , is that as an investment the freehold value at the moment is actually really low because of the economic situation. This means that is probably one of the best times to buy commercial property. Don't let anyone put you off the sipp route as a pension investment as the way I look at it, you're trusting your own judgement in terms of pension investment instead of some faceless city investment broker that more often than not will possibly loose you money. I was lucky enough to start with a £40k inital pension investment which has grown approx tenfold over 10 years without me paying any more into the pension pot. This growth has come from paying tenants on this office property .

That's all well and good, but still doesn't change the fact that transferring out of the Fire Service Pension would be a bad idea. Where did the funds to start your SIPP come from? Was it from a final salary pension? If not, then your comments bear little relevance to the OP's circumstances.

dunstonh

I have been self employed for over 20 years , purchased a commercial office in a sipp about 10 years ago. Probably the best investment I have ever made.

Commercial property had a great boom from the mid 90s to mid to late 2000s. It was difficult to go wrong.

Don't let anyone put you off the sipp route as a pension investment as the way I look at it, you're trusting your own judgement in terms of pension investment instead of some faceless city investment broker that more often than not will possibly loose you money.

So, you would encourage the OP transferring one of the best pensions there is that is not dependent on any investment returns and has a number of guarantees to transfer it then?

thecopshop

Yes I would urge him to still transfer to Sipp. The 2 key points as far as I'm concerned is that the commercial property market although difficult at the moment presents a real opportunity in terms of buying. Freehold prices have reduced massively since 2008 and we are probably at the bottom of the downward curve. The second key point is that the op has there own business and it perfectly legal in terms of sipp rules to have his business as one if the tenants of this property paying a full commercial rent that would be fully tax deductible from his business expenses. One of the reasons freehold commercial rates are so low is that it can be difficult to find tenants. If he can base his business within this property then in effect all this income received from the rental goes towards his pension pot. I cannot think of any other type of pension investment that would provide this level of return. I can only go my own experience which has been extremely positive.

GhIFA

thecopshop wrote: »

Yes I would urge him to still transfer to Sipp. The 2 key points as far as I'm concerned is that the commercial property market although difficult at the moment presents a real opportunity in terms of buying. Freehold prices have reduced massively since 2008 and we are probably at the bottom of the downward curve. The second key point is that the op has there own business and it perfectly legal in terms of sipp rules to have his business as one if the tenants of this property paying a full commercial rent that would be fully tax deductible from his business expenses. One of the reasons freehold commercial rates are so low is that it can be difficult to find tenants. If he can base his business within this property then in effect all this income received from the rental goes towards his pension pot. I cannot think of any other type of pension investment that would provide this level of return. I can only go my own experience which has been extremely positive.

I know the course of action you are suggesting is perfectly legal, I know how SIPPS work - do you understand how Final Salary pensions work?

In the right circumstances, the SIPP strategy you outline can be appropriate, however, the OP currently has his benefits in a scheme that will give him a guaranteed level of pension that is index-linked.The average annual return that would be needed for the transferred funds to match these benefits in the SIPP would in all likelihood still be in excess of rents received, even before the charges of the SIPP were taken into account. Added to this, as has been pointed out, the OP carries no risk in terms of these benefits at the moment - you are suggesting that he moves this into a scheme which puts all of the risk on him, investing in one asset class which, on the plan you outline, is totally tied into the viability of his business - what happens if his business fails? Whilst the SIPP would still own the property, he would have to find other tenants which you have said yourself is not easy.

dunstonh

Yes I would urge him to still transfer to Sipp.

That is just so wrong and I urge the OP not to listen to it as it would be a very costly mistake.

I cannot think of any other type of pension investment that would provide this level of return.

How about the final salary pension he has?

atush

There is nothing wrong with the OP Starting a Sipp- he should be making pension contribs somewhere. And nothing particularly wrong with buying commercial property in your sipp- but do remember if you buy your own premises, that the subsequent failure of your business in years to come could cause you to lose alot of your pension should the building fail to let to a new business at the same rate, or fail to sell. This coupled with the loss of your income might be crippling. Should the worst not happen, it could be a very good thing as you are going to pay rent anyway so why not keep any rental profit? But there are quite large costs to consider as well.

But to advise someone to leave a FS pension, where 10 years will buy a tidy pension in the future, to take all the financial risk of property is just plain awful advice. I can only assume copshop your business venture is not providing financial advice as poor as this.

So, to the OP. Open a sipp, and put as much into it as you can (dont' forget you can add it from your company, so lowing your profits before tax and lowering your NICs paid by the company if you do it via salary sacrifice not to mention lowering your own income tax). After a year or two, if you have enough in it, you could buy a commercial property for yours or someone else's company to operate out of. Speak to yoru accountant who does the companies books about how you can structure your pension to be the most tax efficient you can.

But don't touch your fireservice pension which is slowly growing year by year in the background and will pay off when you retire. This is your fall back position.

opinions4u

thecopshop wrote: »

Yes I would urge him to still transfer to Sipp.

I have to say that this is bordering on the ridiculous.

Take it out of something underpinned with significant guarantees and put it in to something different is bonkers.

The 2 key points as far as I'm concerned is that the commercial property market although difficult at the moment presents a real opportunity in terms of buying.

Yes, you're right. But even if it comes off, the value of the fund in its present home will almost certainly give the OP more.

Freehold prices have reduced massively since 2008 and we are probably at the bottom of the downward curve.

Although there are few indicators to suggest the next three or four years will see that curve do much more than flatline.

I can only go my own experience which has been extremely positive.

Your own experience didn't involve cashing in a state sector final salary pension scheme to fund it though.