A SSAS can invest in commercial property and it could be beneficial for a number of reasons:
- Any income received from the property, such as rent, will be tax-free.
- If the property is later sold and there is a capital gain, the gain will not be taxed.
- A SSAS may borrow half of its net value (i.e. obtain a mortgage) to aid the buying of the property.
- Multiple scheme participants and family members can pool their money into a single SSAS to buy the property.
- The assets held by the pension are generally protected from claims of personal or businesses creditors.
- You’re in control of what you do with the property. You may choose to rent the property to a third party or to your own business, with rental income being paid back into the scheme.
An investment in commercial property through a SSAS can grow your pension’s value directly through rental income, a gain in value, or indirectly through the provision of property for your business to grow further and contribute more into your pension scheme.
Which commercial properties are eligible?
A SSAS can invest in properties or land in the UK and overseas.
You can use the SSAS to invest in commercial properties like shops, hotels, warehouses, factories, eateries, or office buildings, for example.
Instead of properties, you could choose to invest in commercial and agricultural land or land intended for development.
There are some properties that do not fit neatly into either residential or commercial categories. Of those, it’s possible to invest in hospices and hospitals, prisons, care homes and student halls, among others.
While it is technically possible to purchase residential properties this comes with severe tax penalties.
Some things to be aware of when investing in commercial property
- You will be unable to access earnings gained from the investment until you reach 55, as they are retained within the pension.
- Additional transaction, running and set up costs will likely be higher than with other personal pensions
- As with all investments, there’s a risk that the value of your property may shrink over time rather than grow, and you may get back less than the amount paid for a property
- If you rent out the property, there could be periods when you don’t have a tenant, which could mean the property is a cost to your pension, rather than an income generating asset.