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Family ties

How a series of Sipps can be set up to enable a joint property purchase

I have read about family or group self-invested pensions. Can I bring my two daughters into my Sipp and then arrange for them to buy one of the properties from my company?

Apart from being a good marketing tool, there really is no such thing as a family or group Sipp. A Sipp is nothing other than a personal pension and each individual has to have their own arrangement with their own provider.

Yes, you can bring together several Sipps as a group and jointly purchase a property but each individual member will have their own individual contract with their own individual rights.

So, the answer to the first part of your question is no, you cannot bring your daughters into your Sipp. What we can do is set up two new Sipps for them with the same provider and then they can jointly make investments.

The next step is to find how we can move money to their pensions. They are not currently employees of your business and while your company can pay contributions for anyone, it is very unlikely that tax relief would be available to your company in the present situation.

Under the new simplified regime, anybody can pay pension contributions of any amount for anybody, it is just a question as to what tax consequences will apply.

I understand you have discussed the matter with your daughters, their solicitor and your accountant and it is agreed that your daughters will be appointed as working directors of your business. Furthermore, their employment packages will encompass significant pension contributions.

We now therefore have the means whereby two additional Sipps can be set up with your provider and significant contributions paid from your company to their pensions.

The simplification rules did away with connected party transactions, meaning that, with money in their pensions, your daughters will now be able to buy company properties.

The easiest way to deal with this will be for your two daughters to set up a common account jointly owned by the two Sipps and to buy the property via contributions into their Sipps.

Sipps can borrow up to half the value of their net assets. So, for example, if contributions of £50,000 each were made for your daughters, the schemes would be able to borrow a further £25,000 each, allowing a joint purchase of a £150,000 property.

Another opportunity opens up, however, because you are putting in place new contracts for your daughters as directors of the company, including pension contracts.

This means you are creating a liability on the company to pay pension contributions. The contribution could now be made in specie. This means the transfer of an asset belonging to the company of equal value to the liability created by the promise to pay a pension contribution. Independent valuations of any such asset would be required but such an asset transfer could be treated in its own right as a contribution and tax relief sought.

All normal legal procedures still need to take place and you would need to discuss with your accountant the fact that you would be releasing the asset from your business.

Interestingly, some Sipp providers, in addition to allowing in specie property contributions, will also allow partial ownership. If, for example, the property you are considering was valued at £200,000 but you felt it only proper to make a £100,000 contribution to your daughters’ pensions, and they did not wish to borrow any money, the transfer could be effected through part-ownership of £100,000 in the first year, transferring the remaining part of the property in the subsequent year.

There are stamp duty and taxation implications going down this route but it is now perfectly feasible.

Of course, we must not forget your own Sipp and if you wished you could buy the property with your daughters in whatever shares you felt appropriate between all three Sipps.

Richard Jacobs is managing director of Richard Jacobs Pensions & Trustee Services


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