Let’s be clear, investing in property with a pension isn’t for everyone..

However for those of you that feel your pension growth is either not strong enough or, your pension won’t provide a financially strong income for you in the future, using your pension via a SIPP or a SSAS to invest in property may well be the answer.

  • How many times have either you or a friend moaned about poor pension performance?
  • How many times have you seen news headlines slamming poor performing pensions?
  • Have you stopped taking interest in how your pension is performing?
  • Do you have defined contribution pension pots from past employment and have no idea what’s happened to them or even how much they are worth?
  • Do you want to take control and choose what your pension is invested in, rather than an anonymous fund manager, decide for you?

If any of those statements even ring slightly true for you, then you’re on a similar wavelength to me and, a SIPP or a SSAS could be ideal for you too. If you have no interest in how your pension is performing or, no interest in whether your pension will or won’t provide for your future, then a SIPP or a SSAS certainly isn’t for you.

For those that would like further information as to what a SIPP or SSAS is and, the differences between them, please click on the expandable boxes below.

Open this toggle to find out more about what a SIPP is.
A SIPP explained.

A SIPP is a tax-efficient way to save money for your retirement. A SIPP is still a personal pension, you are still saving for your retirement and you still won’t have access to your savings in your SIPP until you reach the age of 55years (under current HMRC rules).

You will receive tax relief on your contributions into a SIPP at the highest rate of tax.

Investments bought in a SIPP will mature free of capital gains tax and any income tax.

Not only do SIPPs boast great tax benefits, you also have more control and flexibility over your contributions and where your money is being invested.

In addition to the tax relief you get when saving your money within a SIPP, you also have the opportunity to take 25% of your total SIPP fund as a tax-free cash sum when you come to retirement.

Once your SIPP is set up, what can you do?

Firstly, most importantly, you now have the choice of what your own pension contributions can be invested in (subject to approval of your SIPP trustee).

You now have the ability to invest in Commercial Property (not residential), such as Hotel developments, or in other assets such as: gold; shares; unit trusts; cash; gilts or corporate bonds.

So, you’ve built up your savings in your SIPP account. It’s now time for you to retire, so what do you do now?

Well, you could…

1) Purchase an annuity – which provides you with an income guaranteed for life (with other benefits if you choose to pay for them) or…

2) take an ‘income drawdown’ giving you the flexibility of taking an income from your SIPP fund and retaining control of your investment at the same time.

You still have the confidence that if/when you die your family can receive money from your SIPP savings. Although this is subject to tax deductions, the majority of people would rather have their family benefit from their years of earnings and savings than have it all go to waste if the pension pot were to die with them.

For more detailed information regarding a SIPP please feel free to contact us. All information we provide will be generic information and if suitable we will introduce you to a FCA regulated professional to provide an independent, no obligation, detailed report specific to you.

Open this toggle to find out more about what a SASS is.

A SSAS is much the same as a SIPP (see above) in the fact that you are again taking control of your pension and again you choose where your pension fund is invested (subject to HMRC qualifying rules).

A SSAS is perfect for business owners, either for partnerships or for executives of a Director-controlled business. Unlike a SIPP a SSAS can have more than one member, normally the business owners.

An added advantage with a SSAS over a SIPP is that original SSAS members are able to, if they wish, register other family members into the scheme, regardless of their employment status. For some this is a great benefit.

All members of a SSAS are their own trustees of the Pension scheme, whether one single member or more, up to a maximum of 12 members. Unlike a SIPP where a third party is the trustee.

The Investments that the members / trustees choose are held in the names of the trustees, meaning that all decisions on investments are unanimously agreed on and members are in common ownership, with no specific assets allocated to any one trustee.

The registration and legal costs of setting up a SSAS are generally lower than those of a SIPP.

For more detailed information regarding a SSAS please feel free to contact us. All information we provide will be generic information and if suitable we will introduce you to a FCA regulated professional to provide an independent, no obligation, detailed report specific to you. .

Are you coming up to age 55 this April?

Are you coming up to age 55 and wondering what to do with your pension?
Here are some options:

£100k Pension Pot

Step 1.
Take your 25% cash lump sum tax-free (£25k)

• pay off mortgage?
• kids wedding?
• home improvement?
• holiday?
• invest?

Step 2.
Take your remaining 75% (£75k) and choose to:

1) Purchase an annuity

2) Drawdown
Take a controlled income from your existing pension provider

3) Cash-in
Using this cash you can:
a) Spend! – buy a shiny new car (value will probably depreciate)
b) Re-invest – make your money work for you

But be aware your fund will be taxed (at your marginal rate)
For example:
• £75k taxable at 40%
• £75k becomes £45k cash
• you lose £30k!

4) Take control with a new retirement planning model:
Exit current provider and re-structure your fund (within a SIPP or SASS) and create a diverse and balanced portfolio of investments that can give you flexible long-term income and strong capital growth and can also be left to your family when you die.

I’m nearly 55, how could a SSAS work for me?
How could a SSAS work for you?

The Basics

1. Transfer pot to a ‘SASS’

2.Take your 25%
tax-free cash lump sum

3. Purchase Asset

• Your pension pot is transferred into a ‘SASS’ –
‘Small Self Administered Scheme’ which unlike other pension schemes, you have total control over; with a SSAS, you choose where your money is invested.

• Use a portion of your fund to purchase an asset;
we can help match you with a a suitable property
investment to form part of your balanced portfolio.

• With property investment you can
benefit from income (rent) AND capital growth

Remember, by choosing a SIPP or a SSAS you’re still investing within a pension environment, but  you’re finally taking more control of your future.

One of the biggest factors, my clients tell me, that led them to decide to invest via a SIPP or a SSAS, was when they learned that:

  • There is no need to purchase an annuity when they retire and they certainly won’t be forced to. However, if annuity rates are high then they can still choose to do so if they wish.
  • Because there is no need to purchase an annuity, the pension value/fund remains within the Pension and if desired can be willed and left to loved ones after death.

That’s exactly why I have a SIPP – I don’t want all my hard earned pension savings becoming someone else’s profit. I want my money benefitting me, or once I’ve gone, benefitting my three kids.

I believe everyone should be informed that SIPPs and SSASs exist. Sadly it seems most people I talk to have no idea about them and I expect I wouldn’t have known either if it wasn’t for the fact I spent so long in the financial services industry, much of that time as an IFA.

When discussing pension investment it’s important to also touch on the topic of risk. After all, that’s what most people, and rightly so, get worried about and I’m no different. At this stage you’re not actually making any decision about risk levels, as a SIPP or a SSAS is still a pension. The different levels of risk come from what you then choose to invest in and all I am talking about here is the concept of converting your existing pension fund from one type of pension to another.

After all, a large part of most people’s existing pensions are in managed funds which in turn are invested in a variety of investments including different stocks, unit trusts, countries etc and of course that’s completely safe isn’t it!

If you search the web you will find many  horror stories about people investing via a SIPP but this is often where people have been convinced inappropriately to invest this way. It was either never right for them in the first place or they were misled into believing that the chosen investment was totally risk free or even guaranteed (see my post on guarantees). Worst of all people were not given access to proper financial advice or were encouraged to make the investment on a self certified or execution only basis.

All our clients, who consider that investing this way could be for them, are passed to an IFA to carry out a full suitability report to assess if the chosen investment product is appropriate for them and only then can they move forward and invest. If it’s deemed that this route is unsuitable then the client is offered more appropriate options or advised to leave the pension where it is.

Remember, setting up a SIPP or SSAS is not ‘pension busting’ or ‘pension liberation’. Be very cautious of complicated schemes or offers suggesting that you can gain access to your pension fund before you reach age 55. Liberating your funds before your allowable retirement age is a taxable event and could cost you dearly.

So, now you know why I and many of my clients have chosen to invest our pensions this way, lets have a look at how taking control of your own pension may work for you too.

Below is a basic example of how your existing pension could work and, using the same pension value and hypothetical annual growth value, show you how a SIPP or SSAS may work for a potentially stronger financial future.

Hopefully I’ve given you ideas as to how you could possibly invest your pension differently with the aim of providing a better financial future for you and your family. I’d welcome discussing any thoughts or questions you may have further, please feel free to email or call 01273 763900

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