sipp

Equity Release

Two directors of a company were looking for capital to help develop new products and move into emerging markets.

They had pension plans accumulated through the years from various sources worth £210,000 – while their company owned two light industrial units, together valued at £300,000.

First of all, they transferred their pension funds into @sipp plans. The @sipp trustee then borrowed £105,000 – providing enough funds to purchase the company’s units and meet the associated fees.

By doing this, the directors released £300,000 for the company to achieve their expansion plans, while the SIPP leased the units back to the company for £20,000 a year.

This rent is now being used to pay off the loan – with all the residual income going into the directors’ @sipp plans, free of income tax, and available for investment in other asset classes.

The directors can choose when the units are sold – and when they are, there won’t be any capital gains tax to pay. In the meantime, their funds will benefit from any capital growth.

The value of property can fall as well as rise and the property will need to be sold to provide your pension income when you finally decide to retire. It may take time to realise the value of your investments.