Commercial Mortgages: Commercial property in pension

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Commercial Mortgages: Commercial property in pension

In recent years falling stock markets and the effect of this on pension funds has encouraged a great many people to invest in commercial property within a Self Invested Personal Pension (SIPP).

This popularity is also likely to grow further following the changes to pensions effective from 6 April 2006 as more providers re-launch their pension products. SIPP investments are not restricted to the funds of one particular provider - the funds can be invested in unit and investment trusts, shares, bonds, gilts or commercial property . As they increase in popularity, it is hoped that providers' costs and management charges will start to come down as previously, SIPPs had generally been the preserve of the higher net-worth investor.

There are a number of benefits of putting property into pension funds. There is no capital gains tax payable on the sale proceeds of a property held in a pension fund and as long as mortgage and contribution limits are not exceeded. There is no limit to the number of properties that can be purchased within a pension fund. VAT is also reclaimable for any property improvements and pensions can be paid from any rental income. Legal expenses can also currently be paid by the pension fund.

Previous rules had permitted borrowing of up to 75% of the value of the commercial property however after April 2006 the maximum borrowing is restricted to 50% of the total net value of the pension fund.

As more people are expected to look at commercial property investments within their pension funds, more mortgage providers are gearing up to lend money to fund this type of purchase. If you would like to talk to an adviser about borrowing money for commercial property for a pension or for any other purpose, please complete a Mortgage Enquiry Form and we will arrange for one of our specialist mortgage advisers to contact you. Alternatively, you can call us on 0845 108 0505.