Overview of Property Investment and Pensions

A brief introduction to investing pensions in property dealing with common misconceptions about this misunderstood asset class and the law in relation to it.

1. Property Investment and Pensions

2. What is a Pension? Dictionary definition? “A regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed during their life.”  Or the reality? “A mechanism that provides a care-free old age of choices and comfort” Investing in pensions or property are not binary choices – th e objectives of each are often the same!

3. Traditional Pension Investments Cash Deposits Bonds/ Fixed Interest Securities Collective Investment Schemes Stocks and Shares These are great solutions for people who are happy with other people being in control of their investment outcomes. There isn’t much that can be done to influence a bank’s interest rate!

4. Why Property Investment? Real Assets – inherent physical worth Stable and Tangible – finite transactional monetary value Evergreen – everybody needs somewhere to live! Insurable – risk to capital value and income stream can be transferred Duality of return – both income and capital growth Leveraged returns - mortgages can amplify ROI Passive v Active Investment – choose your level of involvement

5. Common Misconceptions “Pensions cannot invest in residential property” “Pensions cannot borrow money at 75% Loan-to-value ” “Pensions cannot develop property or operate serviced accommodation – they are trades and pension schemes can’t trade” These are all inaccuracies; pension schemes can do all of the above HOWEVER the investments have to be structured correctly to avoid tax penalties.

6. Genuinely Diverse Commercial Vehicles (GDCV) Investing in residential (taxable) property using pensions is dealt with explicitly in Finance Act 2004 Sc 29A Investing in residential (taxable) property using pensions is also covered in HMRC’s Pensions tax Manual “Indirect investments held through genuinely diverse commercial vehicles will not be subject to tax charges when held as a scheme investment by an investment-regulated pension scheme. There are three categories of genuinely diverse commercial vehicle: UK REITs other kinds of vehicle trading concerns.” Source: PTM125400

7. How to Invest in Property using Pensions Choose the right pension scheme – this will usually be a Self - Invested Personal Pension (SIPP) or Small Self-Administered Scheme. Care must be taken as not all schemes are equal Establish the correct property holding structure – GDCVs can take many forms (not all are prescribed ) and extreme care should be exercised in this regard Invest – select properties that suit your objectives and manage the performance accordingly

8. Summary Investing in residential property using pensions is not only possible but can be beneficial It does require the correct structure and careful planning While there are risks, as with any investment, the potential rewards can be significant DISCLAIMER: Nothing in this presentation is intended to constitute either investment or tax advice.

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