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Loaning person pension/using it to buy property?

Is there any way to lend money in a personal pension to someone?

We would like to buy a property and my OH has a decent sized personal pension fund. If he could lend himself the money it would mean we would pay interest back into the pension rather than to a lender. So the pension fund would receive a guaranteed 7% or so.

Is this legally possible? If so would it need to be done via a SIPP wrapper and if so are there any providers who would make the arrangement?

Comments

  • dunstonh
    dunstonh Posts: 118,551 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Only commercial property purchase is available through pensions. Not residential. Thank goodness.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • jenko
    jenko Posts: 145 Forumite
    A SIPP can make a loan, as long as it is not to a connected party. Connected Parties include:

    Individuals: (The following individuals are connected to the member)
    • Their wife or husband
    • Any person that member is in partnership
    • Any relative of the member
    • Any relative of their spouse / person they are in partnership with
    A relative is defined as:
    • Any brother or sister
    • Any ancestor (so Mum, Dad, Grandmother etc)
    • Any lineal descendant (so Son, Daughter, Grandson etc)
    So a Brother in Law is connected, but a Cousin isn’t.

    Companies:
    • A company is connected to an individual if:
      • That individual alone, or
      • That individual along with any persons or person who are connected to them (including any company)

      control that company

      The loan just has to be set up on commercial terms, there are no other restrictions – as long as you can find a financial institution offering similar terms, you can use them too.

      There is no need to secure the loan against any asset, although this may be risky especially if it is a large chunk of your pension.
    • bugs
      bugs Posts: 186 Forumite
      Part of the Furniture 100 Posts Name Dropper Combo Breaker
      Many thanks for those details, the term 'connected party' has enabled us to do some further searching as well and we have found this PDF - [SIZE=-1]www.ipspensions.co.uk/pdf/SIPP.pdf [/SIZE]

      So my OH cannot loan the pension to himself to buy a property but he could to a friend. Seems rather strange especially as you could invest the entire pension pot into a very risky fund, share, option or even a prison!
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