Using Multiple SIPPS to Purchase Commercial Property

For UK doctors, investing in commercial property can be a strategic move to grow your wealth and secure your financial future. One often under-utilised path to achieve this is by using Self-Invested Personal Pensions (SIPPs).

Dental & Medical Financial Services have been assisting doctors with their financial planning for over 30 years. Understand how multiple SIPPs can be used to purchase commercial property by reading on.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
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What is a SIPP?

A self-invested personal pension (SIPP) is a retirement savings plan that allows you to save and invest money for retirement. SIPPs are similar to standard personal pensions, but they offer more flexibility and control over investments. While SIPPs are typically individual pension arrangements, they can be pooled together to purchase larger assets, such as commercial properties.

Syndicate SIPPs

A syndicate SIPP allows two or more parties to pool their pension funds to collectively purchase a commercial property. This can be particularly beneficial when individual SIPP members lack sufficient funds to make a purchase independently. For example, you could utilise the pension savings of a spouse or partner with business colleagues to share the ownership of a business asset.

Other benefits of SIPPS

In addition to being able to purchase higher value assets, there are other benefits to SIPPS. They also allow for structured ownership to achieve a desired collective model, such as following an existing business ownership model. Plus, SIPPs provide an alternative funding source to purchase a property where personal or business funds may be insufficient.

How to effectively use SIPPs to purchase commercial property

Use a two-phased approach to effectively use SIPPS for purchasing commercial property.

PHASE 1: PURCHASE

1. Identify the Property — The first step is to identify the commercial property you want to purchase.
2. Calculate Costs — Next, determine the total cost of the purchase, including the property value and associated costs such as legal fees, surveyor fees, taxes, and SIPP fees.
3. Ensure Sufficient Funds — You can then ensure that the collective funds are sufficient to cover the purchase. If there is a shortfall, additional contributions can be made, or borrowing can be arranged. Note: A SIPP can borrow up to 50% of the SIPP fund’s net assets.
4. Establish SIPPs — Each participant will then establish their individual SIPPs, which are then linked together in a syndicate arrangement.
5. Transfer Funds — Once this is done, the funds are transferred, contributed, or lent, and a solicitor is appointed to represent the syndicate.
6. Transfer Ownership — Financially, property ownership is transferred to the syndicate SIPP, with ownership proportions reflecting each individual SIPP’s contribution.

PHASE 2: ONGOING OWNERSHIP AND RETURNS

1. Prepare Lease — Once the property is purchased, a solicitor prepares a lease for the tenant, which could be your own business or an unconnected third party.
2. Collect Rent — With this arrangement, the tenant pays rent to the SIPPs, which is then distributed according to each member’s ownership share.
3. Reinvest Proceeds — Each member can then reinvest their share of the rental proceeds into individual assets such as a Discretionary Fund Manager (DFM), wrap, or other investment vehicles.
4. Sale of Property — When the property is eventually sold, the sale proceeds (less costs) are shared according to each SIPP’s ownership share.

Important to remember

It is crucial to plan for unexpected events or material changes in circumstances during this process. Syndicate SIPP members should enter into a formal agreement outlining the process in the event a SIPP needs to realise its investment and exit the syndicate.

Additionally, a property manager should be appointed to inspect, manage, and superintend the property under a formal agreement. This can simply be one of the syndicate members or a professional property management firm can be employed for the task.
For valuable insights for medical and dental professionals and why you should consider this investment strategy, we strongly advise working with an independent financial advisor.
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Professional planning for best results

Using multiple SIPPs to purchase commercial property can be a powerful strategy for doctors and dentists looking to invest in larger assets. However, it is essential to work with a professional to ensure positive outcomes.

For personalised advice and to discuss the best use of SIPP for your circumstances, contact Dental & Medical Financial Services today.