Low property prices coupled with low borrowing rates has seen a surge in private investors using their self invested personal pension fund (SIPP) to purchase property overseas in locations including Brazil, Barbados and St.Lucia. Due to the economic climate property prices have fallen making it a more affordable investment.
Just what is a SIPP?
A SIPP is probably the most flexible form of pension plan that is available today. Working in the same way as a standard pension plan fund, the only difference is a SIPP requires a trustee to manage the fund not an insurance company. What the role of the trustee involves is that they must report to the HM Revenue and Customs Office to claim the necessary tax reliefs and to also work closely with HM Revenue and customs to ensure no Inland Revenue requirements and not been breached. To set up a SIPP, a bank account will need to be opened where the pension fund will be held. From this account the fund will be invested according to the wishes of the investor.
Currently many locations abroad are offering SIPP properties. One popular resort is the Garapua Beach Resort in Brazil. Currently scheduled for completion at the end of 2014, the resort is a 5 star luxury spa resort. Created on 1,700 acres of land this resort is being built to the highest specification and incorporates all of the luxury facilities you would expect of a 5 star resort. These facilities include a Pat Cash tennis academy, a football academy, Gary Player signature golf course and Mai Tai lounge. As well as these facilities it is hopeful an Equestrian centre and Polo club will also be included. This Garapua Beach resort will be maintained to the highest standard by one of the world’s leading resort management companies who have an excellent portfolio and reputation of managing luxury 5 star resorts like the Garapua Beach.
Who is eligible to use a SIPP for property investment?
If you have existing funds available or are able to transfer funds into a SIPP from existing frozen pensions or current pension fund then you are eligible to use the fund to purchase a property overseas. However, financial advice should always be taken first.
I have the funds, how do I purchase a property overseas?
To purchase a property overseas, there are a few options available to you. These include:
- Using existing funds which may be tied up until you actually retire.
- Taking a mortgage out for up to 50% of your actual pension fund.
- Making individual pension contributions to the fund.
When making contributions these can be 100% of your earnings or up to £225,000 tax free if you are self employed. For example a couple who are joint directors of their own limited company can each contribute £225,000 tax free to the SIPP.
What are the SIPP benefits to me?
Purchasing a property overseas offers many benefits including the following:
- If your property is for rental purposes then all income is exempt from income tax and paid gross.
- Once the property is disposed no UK capital gains tax will be applied
- Free of inheritance tax
- If you contribute up to 40% into the plan, this will qualify for corporation tax relief.
I am interested in a SIPP property, what is the next step?
Using a SIPP to fund an overseas property investment is complicated and requires financial advice. A team of experienced team of financial consultants can provide you with all the guidance and advice you will need when considering using your SIPP investment for an overseas property purchase.Continue Reading