Group Property Purchase
The purchase of property through groups is becoming increasingly more popular, be it husband and wife, business partners or company directors.
IPM will only buy property where all of the group are members of the IPM Personal Pension Scheme.
The pooling of pension arrangements gives greater purchase power and where the property is then tenanted by the group, a degree of comfort that the rent is being paid to into the group’s pension arrangements and not the coffers of a faceless landlord. Whist there are advantages of buying as a group there additional factors, to those mentioned above, that must be considered:
The 'Four Ds'
If the property is held for the benefit of more than one member, the ‘four Ds’ should be considered.. They are as follows:
-
Death – of one of the group members
-
Departure – from the group
-
Drawdown – one group member wishing to take a lump sum and regular income from their SIPP
-
Divorce – if a group member divorces their husband/ wife/ civil partner and a pension sharing order is issued a group member my be required to transfer a proportion of their fund to another pension scheme
The above events are the four most common reasons that would require a group to have to rethink their position regarding the holding of property as a joint asset.. There are a number of potential solutions available to a group when such circumstances occur, but they need to be considered at the outset so that the risks are appreciated by all participating members.
When a group membership changes or additional liquidity is required there are several options available:
- the remaining members of the group purchase the deceased/departing member’s part of the property from the SIPP
- a new member could be added to the group who would purchase the deceased/departing member’s share of the property
- An additional mortgage is taken out to provide additional liquidity
- the property could be sold
Taking Benefits
If the client decides to take benefits from the SIPP there will need to be sufficient cash in the trustee bank account to cover any initial lump sum payment and sufficient rental income to cover the annual pension payments.
It is crucial that the cash flow is calculated so that there are sufficient liquid funds to meet a client’s benefits requirements.
If an annuity is to be purchased, all investments including the property will have to be sold.
I.P.M. SIPP Administration Limited, Cintel House, Watton Road, Ware, Hertfordshire SG12 0AD Tel 0845 130 3443 Fax 0845 230 3443
email info@ipm-pensions.co.uk I.P.M. SIPP Administration Limited is authorised and regulated by the Financial Services Authority.
© Copyright 2007 IPM SIPP Administration Limited. All Rights Reserved.