SIPP Borrowing: The 50% Net Value Rule

A SIPP can borrow to help fund a commercial property purchase, but the amount is capped. Understanding the limit is key to setting your budget.

The limit

A SIPP or SSAS can borrow up to 50% of the net value of the scheme's assets. So a pension worth 400,000 net could borrow up to 200,000, giving around 600,000 to spend before costs.

How it works

The borrowing is usually a commercial mortgage secured on the property being bought. Lenders that work with pensions understand the structure. The rent from the property services the loan, and because the rent is received tax-free in the pension, the arithmetic can be attractive.

Points to watch

• The 50% is measured against the scheme's net asset value, so a fall in the value of other scheme assets can affect headroom.
• Interest and fees still apply, so model the cashflow: rent in, loan payments out.
• Voids matter more when there is a loan to service, since the pension must still meet the payments.

Plan the funding

Combine borrowing with existing pension funds and contributions to reach your budget. See how to buy through a SIPP. Take advice from a regulated adviser and a specialist lender.

How much can a SIPP borrow?

Up to 50% of the net value of the scheme's assets. So a pension worth 400,000 net could borrow up to 200,000.

How is SIPP borrowing repaid?

Usually a commercial mortgage secured on the property, serviced by the rent, which is received tax-free in the pension.