Investing your SSAS pension in residential property, before or after the age of 55!

By 26 November 2019April 4th, 2024No Comments

Hands-free property investment is ideal way to get involved in property investment for those without the experience or time commitment requirements

‘But a SSAS is a pension and cannot hold or invest in residential property without incurring hefty tax penalties’, we hear you all cry!

You are all correct in your knowledge that a SSAS may not hold residential property suitable for use as a dwelling; that is the rule, as set out by HMRC. However…

… don’t despair, if your dream is to investing in residential property, there are several ways that your SSAS could still be the tool you need to help you invest.

Interesting eh? Read on…

‘Hands off’ residential property investments are very popular. Crowdfunding, bonds and loans to third party property developers are the ideal way to get involved in property investment, whether residential or commercial, using your SSAS pension. Not only do they earn extremely attractive returns, but they present lower risk, due to security against the property, as well as the opportunity to diversify your investments. Hands off and with little time investment required, such investments in property are fast becoming a key strategy and number one choice of many schemes.

If the pension pot is large enough, it is possible to use the unique loanback feature of a SSAS pension to make a 50% loan from your SSAS to your company which can be used for “any business purpose”. If your company is a property development business, the loan could be used to fund the acquisition of a new site for example. As the residential property is not directly owned by the SSAS, that is perfectly acceptable by HMRC regulations.

It is possible to use a SSAS to ‘develop’ a commercial property owned by the SSAS pension into residential property, but only if you sell the property before completion. Once a completion certificate is issued, it then becomes suitable for use as a dwelling and therefore, against HMRC rules.

You would need to sell the property or properties, prior to completion, to a third party. If an independent valuation is carried out, you could sell the property at market value to yourself, your company or an unconnected party.

Whilst residential property is not allowed, you can buy land with permission for residential development if it doesn’t contain any building or structure, suitable as a dwelling. Once planning permission has been obtained, you could then sell it straight away to a developer, or you could develop the land to the point prior to certification of completion and then sell.

For those over the age of 55 who have not yet taken your 25% lump sum, you are able to transfer your property if its value is within your allowance, prior to completion, to yourself. You could then transfer the property to your company in the form of a director’s loan. You could use the unique SSAS loanback feature to then loan money to your company, from your SSAS, to fund the development of the property.

Using your SSAS in this way is extremely tax efficient. Interest on the SSAS loan given is tax-deductible within your company so you benefit from the loan and in addition, boost your pension fund. At the same time, you are funding your residential development to sell, making a profit that you benefit from personally.

Of course, the other option is to invest your SSAS in the vast amount of other property investment avenues, permissible by HMRC. For example, residential properties that have commercial use such as, care homes, hotels, other commercial use residential properties, student halls, prisons.

So, to conclude, yes there are ways to invest in residential property within HMRC guidelines. However, always seek professional advice. TLP has helped many clients set up successful SSAS pensions and invest in property. Please contact us for a free, no-obligation consultation.

Della Paviour

Della Paviour

Della Paviour. Marketing Manager. TLPI