How to Use Your Pension to Buy Property

SSAS vs SIPP: How to Use Your Pension to Buy Property

Many people want to use their pension to buy property, either for their business or as a long-term investment. UK pension rules allow this if you keep the funds inside a registered pension scheme. The two main options are the Small Self-Administered Scheme (SSAS) and the Self-Invested Personal Pension (SIPP).

This guide explains how both schemes work, their differences, how to set them up, how to transfer existing pensions like ReAssure, and the tax benefits of using them to invest in commercial property.

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What is a SSAS Pension?

A Small Self-Administered Scheme (SSAS) is a company pension scheme created by a limited company for directors and sometimes family members.

• Up to 11 members can join.

• Members act as trustees and control investments.

• Can invest in commercial property, shares, and even lend to the sponsoring company.

• Residential property is not allowed inside a SSAS.

• Must be registered with HMRC.

Example of a SSAS

Two directors with £400,000 combined pensions set up a SSAS through their company. They transfer their funds and buy their warehouse for £500,000. The company pays rent to the SSAS, which grows tax-free inside the pension, while the company deducts the rent as a business expense.

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What is a SIPP?

A Self-Invested Personal Pension (SIPP) is a personal pension giving full control over investments.

• Set up by an individual, not a company.

• Can invest in commercial property (if allowed by provider).

• Cannot lend to a company.

• Suits individuals who want direct control or don’t own a business.

Example of a SIPP

An individual transfers £250,000 from their ReAssure pension into a SIPP. The SIPP buys a small office building rented to an unrelated tenant. Rent goes into the SIPP tax-free until retirement.

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Key Differences Between SSAS and SIPP

• Who it’s for: SSAS is for company directors; SIPP is for individuals.

• Loan-back: SSAS can lend to the company; SIPP cannot.

• Members: SSAS can have multiple members; SIPP is usually one person.

• Control: Both allow you to pick investments, but SSAS offers more flexibility for business assets.

• Cost: SSAS has higher setup/admin costs due to trustee duties.

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How to Set Up a SSAS

1. Draft Trust Deed and Rules.

2. Register the SSAS with HMRC.

3. Appoint trustees (often directors and family).

4. Open a SSAS bank account.

5. Transfer existing pensions into the SSAS.

6. Use a professional administrator for compliance and reporting.

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How to Set Up a SIPP

1. Choose a SIPP provider and compare fees/investment options.

2. Apply online or by paper with ID and NI details.

3. Fund the SIPP with contributions or by transferring other pensions.

4. Complete pension transfer forms for providers like ReAssure.

5. Pick investments such as property, shares, or funds.

6. If buying property, ensure it’s commercial and purchased in the SIPP’s name. Rent is paid into the SIPP tax-free.

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Moving an Existing Pension (e.g., ReAssure) to SSAS or SIPP

• You cannot withdraw funds to your bank account to buy property. That would trigger up to 55% tax.

• You must do a pension-to-pension transfer.

• Contact your SSAS or SIPP provider, complete their forms, and they handle the transfer with ReAssure.

• Funds remain inside the pension wrapper and can be used to buy commercial property.

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Tax Benefits of SSAS and SIPP Property Investment

• Tax-free growth: Rent and gains inside the pension are tax-free.

• Tax relief on contributions:

  • Personal payments get tax relief at your rate.

  • Employer contributions into a SSAS are Corporation Tax deductible.

• No NI: Employer contributions avoid National Insurance.

• No Lifetime Allowance: Since April 2024, there’s no total cap on pension savings, though lump sum limits apply.

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Continuing Contributions and Tax Relief

When you transfer funds into a SSAS or SIPP, previous tax relief is preserved.

• Future personal contributions still receive tax relief.

• Employer contributions into a SSAS reduce company profits and are tax deductible.

• As long as the scheme is registered with HMRC, contributions remain tax efficient.

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Which One Should You Choose?

• SSAS: Best for company directors who want to buy business premises or use the loan-back feature.

• SIPP: Best for individuals or for simpler property investment without company involvement.

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Conclusion

Both SSAS and SIPP pensions allow you to use your pension funds to buy commercial property in a tax-efficient way. SSAS offers flexibility for business owners, while SIPP suits individuals. Transferring an existing pension like ReAssure into either scheme is tax-free if done as a direct pension-to-pension transfer. Managed correctly, these schemes can turn your pension into a powerful vehicle for property investment and long-term tax savings.

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Frequently Asked Questions

❓ I have already bought my office in my company, Adam Accountants Ltd. Can I set up a SSAS now and transfer the property into it?

✅ Yes, it’s possible, but the SSAS must treat this as a purchase of the property from Adam Accountants Ltd at full market value.

• You need an independent RICS valuation to confirm the price.

• SDLT may apply to the SSAS as the buyer.

• If the property has appreciated, the company may pay Corporation Tax on the gain.

• Once inside the SSAS, the property becomes a pension asset, and Adam Accountants Ltd will pay rent to the SSAS going forward.

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❓ How can the SSAS get enough cash to buy the property?

The SSAS can only buy the office if it has sufficient funds to pay full market value. There are two main ways to build that cash:

1️⃣ Cash Contributions

• Employer Contributions: Adam Accountants Ltd can pay money into the SSAS. These contributions are tax-deductible for Corporation Tax if they are part of a remuneration plan and “wholly and exclusively” for business purposes.

• Personal Contributions: You can also pay in personally and receive tax relief at your income tax rate. The annual allowance is £60,000 per tax year per member, with the ability to use unused allowance from the past 3 years.

💡 Example:
If the property is worth £150,000, the company could contribute £100,000, and you could contribute £50,000. Together, the SSAS has the cash to buy.

2️⃣ Borrowing

• A SSAS can borrow up to 50% of its net assets to help fund the purchase.

• The loan must be secured on the property and on commercial terms.

• The lender can be a bank or, if structured correctly, the company itself.

💡 Example:
If the SSAS has £100,000 in cash after contributions, it can borrow £50,000 (50% of assets) to reach £150,000 for the purchase.

3️⃣ Combining Both

Most deals combine contributions and borrowing to make up the purchase price plus SDLT and legal fees.

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❓ What’s the difference between using a SSAS and a SIPP to buy property?

✅ SSAS Example (Business Premises):

• Adam Accountants Ltd sets up a SSAS with £200,000 from company contributions.

• The SSAS buys the firm’s office for £200,000.

• The company pays £15,000 annual rent to the SSAS.

• Rent is tax-deductible for the company and grows tax-free in the pension.

✅ SIPP Example (Investment Property):

• An individual transfers £200,000 into a SIPP.

• The SIPP buys a small commercial unit and leases it to an unrelated tenant.

• £15,000 annual rent goes into the SIPP tax-free.

• The individual cannot lend to their business or use the property for their own company.

🔑 Key Difference:

• SSAS works best for business owners who want to buy or move their trading premises into a pension and benefit from tax-deductible company contributions.

• SIPP suits individuals wanting a personal investment property without company involvement.

📞 Written by Adam Accountancy Ltd

We help business owners and individuals make smart, tax-efficient pension and property decisions.

✔ SSAS and SIPP setup guidance
✔ Pension property investment planning
✔ HMRC compliance and reporting support
✔ Corporation Tax and pension contribution strategies
✔ Long-term wealth planning for directors and families

Want to unlock the tax benefits of your pension?
Book a consultation with a UK tax adviser today
Email info@adamaccountancy.co.uk or call 01753 373505.