There are several ways and means of buying a property with a SIPP. One constant is that with Suffolk Life, property for SIPPs is purchased by Suffolk Life Annuities Limited, an insurance company authorised and regulated by the Financial Services Authority.

Properties can be purchased solely by a SIPP, jointly in conjunction with other SIPPs or jointly with another third party. A feature of SIPPs is that it can borrow to fund a purchase.

This makes a highly attractive business case particularly for the proprietors of small businesses, professional practices and partnerships to use their existing commercial business premises and investments within a SIPP, and in some circumstances it may be possible for the premises to be transferred into the SIPP in lieu of cash contributions.

Investing jointly
Joint investment means that investors may pool funds to make a property purchase, and equal interests in the property are not required. As with any property purchase there are however some serious issues to take into account, and a co-ownership agreement is essential.

Borrowing
It is possible for a SIPP to borrow up to 50%, but only of its net fund value. This is important to bear in mind if the SIPP already has existing borrowings. For example, on face value a SIPP fund of £200,000 can borrow an additional £100,000 to assist with a purchase.  However if there are already £50,000 of existing borrowings, the net fund value is £150,000. With £50,000 of the remaining £75,000 already accounted for, the current borrowing capacity is reduced to £25,000. It is therefore important to carefully plan borrowing with consideration for any future purchases.

The borrowing should be from a conventional high street source but we are quite happy to deal with the lender of your preference.  The terms of the loan will vary from case to case but as a guide you should expect to pay interest probably between 1.25% and 2.5% over base.  The rate will depend upon a variety of factors, particularly the degree of risk to the lender. You or your adviser must negotiate the terms of the loan yourself.