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Using your pension to invest in commercial property

You may already understand how pensions work, including the benefits you may receive once you retire, but did you know that it’s possible to buy commercial property in the UK using your pension pot?

Updated: 10.09.26

By Ben Hewitt

This content was factually correct when written but may not reflect current developments or information.

Using your pension to invest in commercial property

In the same way that your pension can be invested in stocks and shares, it can also be invested in the bricks and mortar of commercial property. The types of buildings that qualify are warehouses, retail units, offices etc. You can’t invest your pension into residential property. This form of investment can prove to be highly tax-efficient, particularly for business owners.

Ben Hewitt, Chartered Financial Planner at Alan Boswell Financial Planners, tells us how it works.

Understanding your current pension

Before you use your pension to buy commercial property, it’s important to understand where you are now.

This means looking at how much your pension is worth, how it is currently invested, and whether your existing scheme allows commercial property investment. In many cases, you may need to move money into a specialist SIPP or SSAS before a purchase can be made. While legislation allows for the purchase of commercial property, many pension providers prefer to offer simple pensions and don’t have the resources to manage the admin associated with buying commercial property, such as organising insurance, chasing rent, or dealing with conveyancers.

You should also consider whether buying a commercial unit would take up too much of your pension pot. Commercial property can be a valuable pension investment, but it is not the same as holding a spread of funds, shares, or other more liquid assets. It can take time to buy and sell.

There is no single right stage to buy commercial property through a pension. However, the decision usually needs to make sense in the context of your retirement, business, and your wider financial plans.

For example, this approach is often most relevant to people who run a business and would benefit from purchasing a property to operate from, while the rental payments from your business are paid into your pension. If you do not run a business, the benefits may be less, so the property needs to be judged more than simply as an investment. 

Before making a decision, it is worth asking:

This is where regulated advice is important. A financial adviser can help you understand your current pension, check whether commercial property investment is suitable, and explain how the decision could affect your retirement plans.

Benefits to you and your business

As both the business owner and pension holder, you know the pension trustees and you know how much they want for rent. Your pension is growing by the rental amount each month, and you know that at retirement you can sell the property. Plus, because it’s your business that’s occupying the property, you don’t have to worry about what any tenants are doing in there.

Investing in commercial property can be beneficial if you’re a business owner, as you’ll end up with suitable premises for your company, as well as regular rental payments into your pension. Plus, it’s highly tax-efficient.

Example - You’re the owner of a business that’s outgrown its current premises. You’ve spotted the perfect warehouse for sale at £0.5m, and you have a pension pot of the same value. Once your pension trustee has confirmed the building is a sensible investment, the surveys and paperwork can commence and your pension funds can be used to buy that warehouse. Once it’s all completed, the building will be owned by your pension. Your business will take up a commercial lease with the pension, with rental fees based on standard market rates and negotiated with your pension trustee. Each time you make a rental payment, the money is paid straight into your pension, not a landlord. So, not only have you secured new premises for your business, your pension now has a tangible investment too.

If your pension pot won’t cover the purchase price…

This doesn’t necessarily mean you can’t invest. You have two choices:

  • Add extra money into your pension before purchase

This is where the pension system can really be utilised to its fullest. If you’re a 40% tax payer and need another £10,000 in order to buy the property, then you’d only have to add £6,000 to your pension, because the government tops up your payment with tax relief.

  • Take out a mortgage to cover the extra cost

If you’ve got £500,000 in your pension and the property that fits the need of your company is £600,000, then you could look into arranging a mortgage for £100,000. It is important however to note that pension rules cap the total mortgage at 50% of pension assets.

  • Buy the property with business partners/family members

You can add together the pension pots of others and buy the property in proportion to the amount of capital contributed upfront. This is possible with the use of a group SIPP or SSAS. It should be noted that this will add to the cost of set up and administration, the initial which can run into a few thousand pounds.

If your pension funds are spread across multiple schemes…

You can still invest, but it may be advisable to consolidate them first. If you purchase a commercial property with two pensions, then the building would have two owners. This means you’d double your costs for services such as conveyancing, and you’d also need two rental agreements - it makes sense to put everything together into one pot and then buy your property.

You can go into business with a partner and use your two pensions to buy half of the property each, but it does add to the cost.

If you want to move out or sell up…

You’ll have to honour any terms and conditions of your commercial lease, such as a minimum notice period. After that, you’ll have two options:

  • Rent out your property to another business

  • Sell the property

If you sell your property, you’d have added to your pension pot through tax-free rental payments, and you’d hopefully have made a profit on the property value, which would also go back into your pension tax-free. The sale is also free of capital gains tax as it is held within a tax efficient pension. You have the option then of either making a different investment or, if you’ve reached the minimum retirement age of 55 [increasing to 57 by April 2028], start to draw down that pension

Every investment comes with a risk

Values can go up or down, and you might not get back the original amount invested.

  • If your property has made a loss at the point you sell it, your pension will also make a loss.

  • Under current legislation, you can’t access your pension funds until you’re 55 [increasing to 57 by 2028]. Meaning that any profits you do make on the sale of your building will be locked away until retirement.

  • Also, converting property investments into cash isn’t always a quick process, and that can impact on how long it takes to access the funds.

Some business owners would also prefer to buy the building of their choice, even if it is in poor condition, without having to run it by anyone else first. It all depends on how much control you want to have over your property investment.

The responsibilities of property ownership, such as maintenance costs, should also be taken into account. This is especially important if you’re renting the building out to another business and aren’t there to oversee how it’s being used on a daily basis. 

Getting started

As with any investment, the first step is to get in contact with us as independent financial advisers. We will be able to explain pension assets in more detail, assess your individual circumstances to make sure that investing in property for retirement is right for you, and guide you through the process. Read more: Guide to maximum pension contributions.

Ben Hewitt is a Chartered Financial Planner at Alan Boswell Group. If you have any questions about the contents of this article please give him a call on 01603 967876 or email [email protected]

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The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future. The value of tax benefits depends on your individual circumstances. Tax laws can change.

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