Buying commercial property with pension fund

Japdtp

Hi I have a pension in drawdown with just over 600k, my son has a small business doing well and is ready for a bigger premises.

I have found a unit for sale at about 300k can I buy it using the pension and rent it too him ? 

Is that even possible?

has anyone done similar?

what could go wrong ?

 Thanks for any advice 

Marcon

Japdtp said:

Hi I have a pension in drawdown with just over 600k, my son has a small business doing well and is ready for a bigger premises.

I have found a unit for sale at about 300k can I buy it using the pension and rent it too him ? 

Is that even possible?

has anyone done similar?

what could go wrong ?

 Thanks for any advice 

Do you mean can you withdraw £300K from your pension fund and buy the unit yourself?  Yes, but be aware of the tax consequences, including the tax you'd pay on the withdrawal.

Or (as I suspect you mean) can you use your pension fund to buy it, in which case the answer is 'possibly yes' if you are invested in a SIPP which permits the holding of commercial property, especially when already in drawdown. Best starting point is to talk to whoever runs your SIPP what is permitted.

What could go wrong? Quite a lot! For example, the unit could decrease in value, or even prove unsaleable, which would mean half your current pension fund may be difficult or impossible to realise. Your son's business might fail (hope not) and your SIPP would lose its tenant. The law could change ... In short, proper professional advice really would be a good idea.

Scrudgy

I wish your son success with the growth of his business. However on the commercial property purchase, I will tell you about my neighbour.

He had a building firm and also owned a commercial building and yard in which he kept his plant and materials. He decided to wrap up his building firm and sold all his gear. He kept the commercial premises as his retirement plan and got a company to lease the building and yard. His retirement was very comfortable for a while, and he always had a nice and expensive car, replaced regularly etc.

Fast forward a bit and  it turned out the company leasing the property moved out or went bust and left the building empty, this coincided with a glut of commercial property being available and my neighbour could not rent it out. He did however still have to pay all the council rates for a commercial property which had offices, warehouse and yard, which was a lot of money. The neighbours retirement is very different now, no fancy car anymore. 

I guess this could fit the what could go wrong question.