Sipp vs Ssas anyone else in the same boat??

iwantasmallholding

Having worked for the government for 11 years my pension has now been changed drastically. I took the bold step to opt out as the 450pm could be better invested. I know what I want to do. I just don't know how to do it.

Basically I have professional knowledge of HMO regs and housing/tenancy law. I plan to start a ltd company, and buy HMO properties or residential properties which would be converted into commercial hmo's. The returns are huge, and I plan to take a career break when it becomes hard to manage balance time/work.

The reason for a ltd company is to allow me to make my kids directors in the future (3 of them) and thus reduce inheritance tax, and allow dividends to be paid to help with uni fees and deposits for their own houses.

My pension pot is worth 150k and my wife's 80k. Is there a way to lend my newly formed ltd co money for the deposit on my hmo's or is there anyone else that wants to trade investments in there ltd co for investment in mine. I am waiting for my finally valuation certificate and then I'll be off to my accountant but wanted to know what to ask him, and if it is possible.

I have read everything I can on google and it's very grey around hmo's being commercial or residential.

Thoughts? Advice? In the same situation?

Thanks

dunstonh

I took the bold step to opt out as the 450pm could be better invested.

Oh boy. What a poor decision that was likely to be. What is the critical yield needed on the investments to beat the pension?

Lokolo

If you worked for the government then you don't have a pot. You have a guaranteed future pension which comes with a transfer value.

The changes to your pension would have lowered to outcome for future payments, but the amounts would still be great. It is a pretty poor decision to decide not to continue with this.

You would not be able to put your pension payments into the LTD company. You cannot use your pension to buy the LTD company either. You cannot buy residential properties inside a SIPP.

I am not totally sure about your personal circumstances, but with around £30k debt, deciding to pull out of a DB pension to buy HMO properties as a startup company, seems, frankly absurd.

Thrugelmir

You'll struggle to obtain mortgage finance through a Limited Company.

Having worked for the government for 11 years my pension has now been changed drastically.

In what way?

Daniel54

You would probably be better posting this on the Pensions board,but a few quick comments :

I don't know the definitive answer to your question as to whether an HMO can count as commercial property .However as an HMO is by definition a residential property -and residential properties cannot be held in a SIPP - my default answer would be no.

If you are in a defined benefit scheme ,which I assume you are,then you will need an IFA to sign off the transfer out.They may or may not agree to do this

If you are in a non funded Government scheme,then you cannot now transfer out.It is forbidden

By opting out of the pension scheme you have forfeited your employer contributions,which will most likely worth considerably more than the £450 per month you contributed

What scheme were you in ,and also your wife ?

From reading your signature,my best advice would be to re-join the pension scheme ( if you can) ,pay down your debts and take professional advice before entering into an HMO business venture

kidmugsy

iwantasmallholding wrote: »

Having worked for the government for 11 years my pension has now been changed drastically. I took the bold step to opt out as the 450pm could be better invested.

A nation cheers.

iwantasmallholding

Thanks for the comments, I am aware that I will not be getting the governments contributions. But i have been moved from a final salary, retiring at 50 on full pension to working an additional 10 years, to receive less, or an additional 5 years and receive 25% less. Also the life expectancy after retirement is not great, so I would probably never see a decent bennifit from my pension contributions. Hence the ltd company and kids being directors. Al for my debts I have about 180k capital in my house, so some of this was going to inject some funds into the ltd company.
I am fully aware that he government pays nearly double what I do, but I can't take it with me, and don't want to work will I am 60 as I doubt I will make it with shift work.

My pension pot at retirement would be in be region on 500k with my contributions and the governments. If I have 150k now and buy only properties I would hope that with rent and property prices all being paid in I would be able to build a pot of this size in the next 20 years.

Also they way people are dropping out of the pension I doubt it will remain on the same terms for the next 20 years and I will likely be working shifts till I am 70. Or binned off through ill health and waiting till 70 to draw my pension.

There is a lot to be said about being in control of your own destiny and I may not be better off but my kids will be made for life by doing the ltd company route.


I read somewhere that a sass could loan 50% of the pot value to buy commercial property? As buying land and renting storage containers would be another option.

dunstonh

But i have been moved from a final salary, retiring at 50 on full pension to working an additional 10 years, to receive less, or an additional 5 years and receive 25% less.

That may be reason for you to be unhappy. However, it doesnt change the fact that what you have done is almost certainly going to produce less than staying in the revised scheme.

Also the life expectancy after retirement is not great, so I would probably never see a decent bennifit from my pension contributions.

In which case, you transfer out of the pension.

My pension pot at retirement would be in be region on 500k with my contributions and the governments.

You keep mentioning pot. Most of the Govt schemes are defined benefit. Can you clarify which yours is.

I am fully aware that he government pays nearly double what I do, but I can't take it with me, and don't want to work will I am 60 as I doubt I will make it with shift work.

Actually, if its one of the main Govt backed scheme then the actual benefit will be far more than double.

There is a lot to be said about being in control of your own destiny and I may not be better off but my kids will be made for life by doing the ltd company route.

There is also a lot to be said about making extreme decisions without knowing the facts and the alternatives and options that exist.

coyrls

iwantasmallholding wrote: »

I know what I want to do. I just don't know how to do it.

Or, it appears, even if you can do it. Perhaps it would have been wiser to have resolved these questions before making your bold step.

kidmugsy

iwantasmallholding wrote: »

Also they way people are dropping out of the pension I doubt it will remain on the same terms for the next 20 years

The more people who drop out, the more easily the taxpayer can continue to fund the largesse.

Personally I'd rather we scrapped the extravagant pensions for government employees, and just paid whatever pay rises proved necessary to attract and retain staff. Naturally, I'd expect pay to vary according to which skills are in short supply, and where in the country the shortages occurred. If that meant that some people found their pay reduced, so be it; doubtless most would find their pay increased.

Apodemus

I can understand your "bird in the hand" view of your pension, although I would never let that emotion get in the way of the logic of staying in a defined benefit scheme.

What I don't understand is why anyone would want to operate an HMO as an alternative to continuing secure Government work. That is a tough game to be in and not one I would want to get into as I get older. I suspect, though, that your current line of work may be one that gives you experience and advantages in this business?