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Using your SIPP for property investment

Here's how you can cash-in on one of the longest standing advantages of having a SIPP - buying commercial property. There are just a few things you'll need to know.

There are some great advantages associated with doing this;
• Growth of the property will be free of capital gains tax and it will be free of inheritance tax on death.
• Any rental income you make from the property will be paid directly back into the SIPP. This allows your pension to grow further.

Borrowing from your SIPP;
You can borrow 50% of the value of your SIPP, and remember that's not the same thing 50% of the value of the property you want to buy.

Here's an example:
A SIPP has total assets of £100,000 in investments, all of which can be readily used for investing in a property. The property is valued at £150,000. The borrowing is restricted to a maximum of £50,000 (i.e. 50% of £100,000), which means that the SIPP can raise a total of £150,000 towards the purchase of the property (the existing fund value plus the additional £50,000 gained through the borrowing).

Joint purchase by two SIPP holders;
Two or more SIPP members can buy property together, irrespective of the fact they may hold SIPPs with different providers. This can cause administrative complications and this is why this option is rarely offered, but don't let it put you off!

Joint purchase with connected parties is also allowed. This means spouses or business partners can purchase a property jointly with their SIPPs.
Any property purchased by a SIPP is actually purchased by the SIPP administrator provider on behalf of the SIPP policyholder.
Investing in property, particularly with a SIPP, can be risky and complicated, so it is advised you seek some form of financial advice prior to doing so.

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