transfer commercial property into SIPP

AKW

Hi all, 
having been self employed and later company directors for all our working lifes, we have never invested into a pension but instead used our savings to aquire commercial property which we rent to the company we own as well as other tenants. This provides us with rental income on which we pay income tax. In in a conversation with our accountant mainly regarding our IHT planning, it was suggested that we invest our commercial property into a SIPP. This would prove beneficial not only saving personal income tax, but also be a vehicle to pass the value of the properties to our children, as far as I understand. This sounds perfect, especially as the intention for owning commercial property was exactly that, namely giving us a "pension" by way of rental income. 
We don't want to exchange our self-regulated income with one that is exposed to the fluctuations of the property or stock market. At the moment we have tenants, and if we were to loose them we would actively find new ones. Our premises are fully occupied, probably because we charge low rent and are reasonable and flexible landlords. My thoughts are that ideally we would like to "wrap" our commercial properties into an SIPP that we can provide ourselves, not for any investments by other parties, just solely for providing our pension out of our commercial property, with the tax breaks that are given to pension contributions and pay outs. Is that possible?

Dox

Talk to your SIPP provider. Not all SIPPs will allow you to hold commercial property. 

If you google on 'holding commercial property in a SIPP' you'll get links for many happy hours of reading!

AKW

my question is if I (or a company I be a shareholder of) can become the SIPP provider, solely for the purpose of holding our properties in it, thanks

Linton

SSAS?

https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/workplace-pension-schemes/dc-small-self-administered-pension-schemes

Google for more info.

Dox

AKW said:

my question is if I (or a company I be a shareholder of) can become the SIPP provider, solely for the purpose of holding our properties in it, thanks

Sorry - I thought it was a more general enquiry. The answer is no (I wonder why you thought you wanted to become your own SIPP provider? It may not give the advantages you hoped might follow), although as Linton has helpfully pointed out, you could investigate using a SSAS. One of the best/most recent guides is here: https://www.xafinity.com/theme/www.xafinity.com/SIPP & SSAS Images/Modules/SSAS_Commercial_Property_Guide.pdf

AKW

Sorry for my ignorance, I still don't quite understand it. Once the properties are invested into a SIPP or SSAD, who owns them? Does the provider become our landlords? Can a property be sold? Would the asset be diminished by drawing a pension, or is the pension equal to the rent?  

Linton

AKW said:

Sorry for my ignorance, I still don't quite understand it. Once the properties are invested into a SIPP or SSAD, who owns them? Does the provider become our landlords? Can a property be sold? Would the asset be diminished by drawing a pension, or is the pension equal to the rent?  

A pension of this type can be regarded as a distinct “person” like a company.  It is managed by trustees rather than directors. The law permits it to do a restricted number of activities a company could do such as owning and managing commercial property. In your example the property would be generating rent, and the rent paid out to the beneficiaries of the pension.

AKW

Thanks, that was helpful. If I understand that right, the pension is like a comapny, its trustees are similar to a company's directors and its beneficiaries are similar to a company's shareholders. I assume that each personal pension is its own identity (and not merely part of the accumulation of many). I assume that the trustees are the penison providers, but the pension is owned by the beneficiaries. Will the trustees have the freedom to trade the assets of the pension, in our case sell the premises? Can the beneficiaries request a sale of an asset? Could the trustees mismanage the assets and loose them to other liabilities? I read in another thread about a man who invested his entire pension pot with a company how seemingly may have defrauded him of his funds - is that something that could also happen with a SIPP?
I am just wondering how the title deeds are affected, is the title charged by the pension? Will we need to re-write the leases?
I very much appreciate that you have taken the time to explain this to me and I hope your explanations may be useful to others, too. Many thanks.

normpearce

The Pension is nothing like a company. The SIPP is a discretionary trust set up with yourself as the member trustee and sole beneficiary along with pension trustee company as corporate trustee on the plan. You are in full control of the asset and can choose what is bought/who occupies it etc. The pension administrator simply keeps you within HMRC guidelines and provides all reporting/ administration requirements on your behalf.

I am struggling to understand why people are recommending a SSAS to you. The SIPP is your cheaper and more efficient route for a simple pension property purchase.

Strange that people are recommending Xafinity to you also, from our personal experience, they are on the more expensive side and are not as proficient in this area as others. I would steer you more down the route of providers like  InvestAcc or Talbot + Muir for example. 

midlandsimon

Hi AKW,
To add to normpearce's post above who makes some good points. You ask a lot of questions which cover a lot more than just putting commercial property into a SIPP. I would strongly suggest you read a SIPP providers 'Key Features' document which provides a lot of the answers you are looking for.

Albermarle

I read in another thread about a man who invested his entire pension pot with a company how seemingly may have defrauded him of his funds - is that something that could also happen with a SIPP?

Remember that a SIPP and the investments within it are two separate items . There has been many instances where unscrupulous financial advisors have persuaded gullible people to transfer their money into unsuitable unregulated investments within a SIPP.

Such as Amazonian rain forests, property development in Albania etc 

Advisor gets a huge kickback - and the money quickly disappears. SIPP provider says they are not responsible for what people invest in , although not everybody agreed.

In fact  mainstream  reputable SIPP providers will not  offer investments of this type anyway. .