Have you ever wondered who owns most of the office blocks, shopping centres, industrial estates, and warehouses across the UK?
The simple answer is the biggest owners of land, buildings and infrastructure are the Crown, the Church, the Government and Pension/Investment funds. It was Legal and General who part owned/built the Dartford Crossing/Bridge, and the Canada Pension Plan Investment Board owns the Trafford Centre in Manchester. Even on our High Streets and business estates many other commercial units will be owned by an individual’s pension fund or supertanker pension funds. The directors of this website/firm, Roberts Clark IFS Limited, own our own offices via their pension funds and rent it back to their Limited company.
Commercial v Residential
So, the simple answer is “yes”, pension funds can own property, but it must be commercial property and not residential property. Commercial property is a ‘permitted investment’ under HMRC pension scheme investment rules as are stocks, shares, bonds, and cash. The commercial property must also be ‘immovable’ i.e., a building from 2006. Before 2006, movable business assets such as plant and machinery could be purchased by a pension fund and leased to the business owner but not anymore.
Semi-Commercial
Residential property is not a permitted investment inside a pension fund, but they may purchase commercial property with limited residential accommodation for managers/caretakers/overnight security etc., e.g., a hotel but the owners of the pension fund cannot usually live in the residential part (as they are ‘connected parties’).
Pensions and Borrowing
Your pension fund can even borrow money. Your pension fund can have a mortgage. Borrowing is restricted to 50% of the pension fund value. For example: if your pension fund is worth £200,000, the pension fund could borrow £100,000 + £200,000 in the fund to buy a commercial unit for £300,000.
Tax Benefits
Types of Pension Scheme
Apart from the ‘supertanker’ commercial property funds run by big investment and pension firms, individuals and business partners can use their own pension funds to buy commercial property either via: