For many, funding is the main barrier to achieving their residential property dreams. The traditional method of approaching banks and dealing with legal bodies, not to mention the associated fees and charges can be arduous, complex and discouraging. A method of funding that many do not realise is available to them is the opportunity to use funds held in pensions pots.

If you are a business owner, it is perfectly within HMRC rules to take control of your pension funds and invest them at your own discretion. This can be achieved by starting a Small Self-Administered Scheme (SSAS) pension.

Rather than making new contributions to a pension many of our clients transfer frozen and dormant workplace and personal pensions into a SIPP or SSAS to allow them to invest in property. This is a simple process however it is important to have an investment strategy in place, so that you can decide on the right SIPP or SSAS scheme provider for you. If you are transferring a pension you also need to consider any benefits that you are losing.

The following strategy examples illustrate just some of the many ways a SSAS can be used to facilitate residential property investment, completely within HMRC rules when a hands-free strategy is employed.

The SSAS loanback facility

Within HMRC rules, up to 50% of the total value of the SSAS fund can be loaned to your company to be used for any valid business purpose. For example, the purchase or development of residential property. Many take advantage of pooling pensions with others (a SSAS can have up to 11 company or family members), to increase the SSAS pot and hence, the 50% value available for the loanback.

Loan to a 3rd party

A loan fro your SSAS to an unconnected party is allowable within HMRC rules. For unconnected loans, there are less restrictions in terms of loan size, but it must be prudent, on a commercial basis and terms of the loan can be decided by the trustees (members) of the SSAS.  Therefore, SSAS funds can be used to invest in unconnected residential property development.

Develop’ a commercial property or land owned by the SSAS, into residential property

A SSAS may purchase and hold commercial property or land, to convert to residential property, up to the point it becomes habitable. The strategy is to develop the property up to the point before it receives habitation certification. The development/property must then be sold at current market value, to yourself, your company or to a 3rd party for completion.

As the SSAS fund has increased, due to the sale of the property prior to completion, many take advantage of the increased pot and SSAS loanback facility to provide cashflow for the continued development of the residential property.

The above are just a few examples of the many strategies that can be employed to facilitate residential property investment and development, using your SSAS. 

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