Top 10 SIPPs/SSASs FAQs

1. What is a SIPP, what is a SSAS and who can benefit from them when investing in Commercial Real Estate (CRE)?
2. What are the legal responsibilities of trustees/providers of a SIPP or a SSAS?
3. Can a SSAS lend money to its sponsoring employer, and what are the legal conditions?
4. Are there legal restrictions on the types of investments a SIPP or SSAS can hold?
5. Can I hold CRE in a SIPP or SSAS?
6. What are the legal steps for transferring CRE into a SIPP or SSAS?
7. Can a SIPP or SSAS borrow money to invest in CRE?
8. Can I sell my property to my pension fund?
9. Can I purchase part of a property into my pension scheme?
10. Are there any other services you offer that may be of interest to a SIPP/SSAS?

1 - What is a SIPP, what is a SSAS and who can benefit from them when investing in Commercial Real Estate (CRE)?

A Small Self-Administered Scheme (SSAS) is an occupational scheme which is typically set up alongside a limited company, for the benefit of the directors/shareholders/senior management team of that company. A SSAS can have anywhere from 1 to 11 members, and the members are also trustees of the scheme. The members would all share in the investments made in the scheme, so any CRE acquired by the scheme would benefit the members jointly. Whilst it is not required by law, a SSAS will normally have a professional trustee whose role is to ensure compliance with relevant rules and regulations.

2 - What are the legal responsibilities of trustees/providers of a SIPP or a SSAS?

Trustees must act prudently, maintain accurate records, and ensure investments comply with trust law and pension regulations. The extent to which trustees must act prudently to protect the interests of the members has been subject to much discussion and litigation in recent years.

3 - Can a SSAS lend money to its sponsoring employer, and what are the legal conditions?

Yes, up to 50% of the fund value, but loans must be secured and meet strict legal criteria – such as (but not limited to), the value of the asset securing the lending being at least equal in value to the loan amount plus interest, and the charge being a “first charge”.A SIPP is not able to lend funds to the pension member.

4 - Are there legal restrictions on the types of investments a SIPP or SSAS can hold?

Yes, while both offer flexibility, investments must comply with HMRC rules to avoid being classed as “taxable property”, leading to unauthorised payment tax charges on the scheme and members. The most common type of “taxable property” is residential property, namely property that is suitable for use as a dwelling, such as buy- to-lets, holiday homes, and apartments. There are some exemptions, subject to certain criteria, such as hotels, prisons and care homes/residences. There are also job-related exemptions, so for properties like pubs with living accommodation/letting rooms and bed and breakfast accommodation, these are assessed on a case-by-case basis.

5 - Can I hold CRE in a SIPP or SSAS?

Yes, if your SIPP provider or SSAS trustee allows you to make such an investment. If you don’t already have a SIPP or SSAS, you should talk to your financial adviser to ascertain which would be best for you, and which provider or trustee they recommend.

6 - What are the legal steps for transferring CRE into a SIPP or SSAS?

If you already own a commercial property that you wish to sell to your pension scheme, you will need to appoint a lawyer to represent (1) the pension scheme as purchaser and (2) you as seller. Birketts can, on a case-by case assessment basis, act for both seller and buyer (we would need to ascertain that there aren’t any parties with conflicting interests). You or your financial adviser would need to ensure sufficient funds are held in the pension scheme in readiness for completion.

From here, the process is the same as a standard CRE transaction, namely;

(a) Seller’s lawyer deduces title and prepares sale documentation and replies to enquiries;

(b) Buyer’s lawyer carries out title assessment, searches and reviews enquiries, and raises any bespoke enquiries;

(c) Seller’s lawyer replies to enquiries;

(d) Buyer’s lawyer produces report on title, reports to any lender involved, and prepares any lease to be put in place on completion;

(e) Purchase documentation finalised and circulated for signing;

(f) Completion money transferred;

(g) Completion takes place and registration application submitted to HM Land Registry.

The steps set out above also apply where the property is being purchased from a third party unconnected to you, save that Birketts would not be able to also act for the seller.

7 - Can a SIPP or SSAS borrow money to invest in CRE?

Yes – the borrowing can be (depending on the provider/trustee’s requirements) from a connected lender (subject to meeting certain criteria) or a high street bank/building society. The loan amount cannot exceed 50% of the net fund value of the scheme assets (combined if more than one SIPP).

8 - Can I sell my property to my pension fund?

Yes, you can. However, all transactions between the pension scheme and the connected party must be at fair value, on arms’ length terms. Therefore, a valuation from a RICS-qualified valuer will be needed to ascertain the sale price. Also, any lease from the scheme to the connected tenant would need to be at a fair market rent, and on fair terms, as advised by the valuer.

9 - Can I purchase part of a property into my pension scheme?

Yes – the pension scheme does not need to own the whole, which can assist if the pension scheme is not currently sufficiently funded to buy the property outright, or if the company/members wish to retain or acquire an interest outside of the scheme. In such a case, the property would be jointly held, and a bespoke trust deed would be put in place to govern the ownership and management of the Property.

Separately, the pension scheme could acquire a defined physical part of a property, such as a café forming part of a nursery, provided that the area can be clearly identified, valued, and held separately. Importantly, it should not be inter-connected with residential property (nor, preferably, other commercial property) and have all necessary rights of access, services etc. so as to be capable of being sold or let separately to the remainder of the site.

10 - Are there any other services you offer that may be of interest to a SIPP/SSAS?

Yes – we have several other practice areas that lend themselves to a SIPP/SSAS- including but not limited to;

Property Disputes – adverse possession, boundary disputes, issues with exercise of rights, service of notices etc.

Construction – advice on construction documents such as building contracts, appointments, collateral warranties etc.

Private Client Advisory – issues/disputes with distribution of pension assets on death, issues with LPAs, removal of pension trustees etc.

Tax – advice on VAT, SDLT

Tax and Trusts – advice on Trustee Registration Service

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