A SIPP is permitted to borrow money to acquire a commercial property asset.  The borrowing should be from a conventional High Street source but we are quite happy to deal with the lender of your client's preference.  The terms of the loan will vary from case to case but as a guide interest probably between 1.25% and 2.5% over base should be expected.  The rate will depend upon a variety of factors, particularly the degree of risk to the lender.

You or your client must negotiate the terms of the loan yourself. We do not give investment advice and will not therefore advise on the terms of any loan offer from a lender.

The amount permitted to borrow is restricted by HM Revenue & Customs to 50% of the net value of the assets in your fund less any existing borrowing. A fund valuation must be carried out prior to purchase, so that we know that the property borrowing will be permissible. We will organise the valuation as soon as it is indicated that the purchase will proceed. Bear in mind that if the proposed property is VAT elected and VAT has to be paid in addition to the purchase price, the VAT can only be borrowed if it is within the 50% limit.

Borrowing by pension funds should be non recourse as far as the pension scheme member is concerned. This means there should be no personal liability for the loan. Indeed, personal guarantees in respect of SIPP borrowing are not allowable anyway.

The ability to borrow does not cease when benefits are taken from the SIPP.

It is also possible to borrow money for the purpose of developing land owned by a SIPP. Such borrowing will be subject to exactly the same rules as for purchase. Improvements to a property owned by a SIPP should generally be paid for through the SIPP and will usually result in an increase in rent to the underlying tenant.

We will normally insist on the appointment of a main contractor to carry out development work. We will also usually insist on a fixed price contract and for the transaction to be properly supervised as it proceeds.