Aparthotel Investment - SIPP

Buying a hotel room via a pension is relatively straightforward provided you use an experienced and competent pension provider. Vision Developments have partnered with pension providers who are competent and very cost-effective in property investment if you encounter any difficulties with your present pension provider or financial adviser.

Aparthotel Sipp Investment

You need to make sure that your pension is fully funded for the purchase. This means ensuring there is enough cash to carry out the purchase other than any finance being provided. It is only when the pension is fully funded that the pension trustees are likely to permit the purchase to go ahead.

Mortgages for private buyers are available to pensions on a limited basis according to HMRC rules. These rules permit a pension to borrow 50% of its net assets prior to the property purchase and this can mean that a small pension could borrow as little as 33% of the property price. For example, if the pension had £77,000 of net assets within it, then it could borrow an additional 50% or £38,500 to then purchase a £115,500 property (costs ignored for purposes of simplicity).

The good news is that the net assets within the pension have come after tax relief and, for an upper rate tax payer, they will have only made a contribution of 60% of the net assets with the remaining balance having been contributed by the taxman, HMRC. In the above example, the £77,000 of net assets would have been made up of a net contribution by the investor to their pension of £46,200 with the remaining £30,800 being made up of tax relief. In other words, for every £1 invested into a pension for an upper rate taxpayer with a suitable amount of tax to reclaim, they are achieving £1.66 of assets within their pension after the tax relief. The investor could look at this in a different way and say that they purchased the £115,500 property with just £46,200 investment, a further £30,800 contributed by HMRC out of their tax bill already paid, and then a further £38,500 of loan. Specific circumstances vary and you should seek professional advice on your pension fund situation.