Joint Self-Invested Personal Pension - Macbeths Insurance & Pension Advice

Pensions in a Basket

Many business owners have ambitious plans for their business and pension. Many of these entrepreneurs see their business or their property as their pension, and of course there is some merit in this, but isn’t this also a real “eggs in basket” risk.

There’s a great opportunity at this time of year to make some excellent inroads into improving pension provisions, and at the same time reducing future tax liabilities for the owner managers of businesses.

  • Improve Pension Provisions
  • Reduce Tax Liabilities

Below is a case study outlining how such inroads can be made.

A husband and wife, both directors of a small local business, have as yet, made no provision for their pension. They jointly and equally own their own business premises personally. Its worth £200k. The premises has a mortgage of £100k and the business is expected to make large profits before the company year end of 31st of May 2018.

The couple choose to invest in a Joint Self Invested Personal Pension (SIPP)

They take a joint SIPP before the end of the tax year, with the company making a £40k contribution for both directors. The property is valued by a RICS registered valuer at £200k and is not ‘opted to VAT’. On the 7th of April, the company pays a further £40k in company contributions for both directors. The joint SIPP now has assets of circa £160k after set up fees and it has borrowing power of £80k. The joint SIPP borrows sufficient cash to finance the property purchase. The two directors receive the £200k cash for the property sale, (which may be subject to Capital Gains Tax) and repay their personal mortgage. The company has paid £160k in pension contributions before their year-end and reduces their corporation tax considerably.

An excellent outcome for the company and the directors.  The directors have a great start to their retirement planning in the shape of a pension that has the potential to grow through rental income. Also, any capital growth of the property will be free of tax being that it is now owned in a SIPP.


Author: Simon Claxton | February 7th, 2018

Contact the author

Simon Claxton
Get in touch:   Reading: 0118 916 5480   London: 020 7036 8767