Buying a Holiday Home with SIPP

Whether you’re interested in buying a holiday home with a SIPP (self-invested personal pension) or a SIPP holiday let property, there are some important considerations you should be aware of, and they are explained in this article.

Here’s what we’ll be covering:

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Can I buy a holiday home with my SIPP?

Strictly speaking it is possible to buy property, but most pensions experts would only recommend it under specific circumstances.

SIPP clauses tend to state that residential properties (whether home or holiday home) are not allowed as part of your pension portfolio, though there are some ways around this. Read on to find out what they are…


Can you get a buy-to-let property?

The same applies with any type of residential property (including buy to let) in the sense that it’s much harder to buy a property with a SIPP. If you’re keen to do it then the best method may be to withdraw the money first. If you’d like to discuss your options, give us a call on 0808 189 0463 or make an enquiry here and we’ll put you in touch with a pensions advisor who can advise you according to your circumstances.


How do you buy a holiday home let?

If you’re keen to purchase a property using your SIPP then the best way is to withdraw some funds from your pension pot and put that towards your mortgage to purchase a holiday property. For SIPP pensions however you can’t withdraw funds until you’re 55 so you would have to wait until then.

A second and more common option is that it’s possible to own shares in a holiday let company, that way you don’t fully own the house yourself so don’t contravene the conditions of your SIPP.

To discuss these options in more depth, make an enquiry and one of the pensions advisors we work with will discuss all of your available options and introduce you to the best SIPP provider for your needs and circumstances.


Can I buy a holiday let?

In order to buy a property that you want to let out, you’ll first need to withdraw your money out of your SIPP. You can then use that income to get a buy-to-let mortgage.

Don’t forget that owning a buy-to-let has many associated costs. You can find out more about the buy-to-let process and terms here.


Using a SIPP for a property abroad

The same considerations as above should be taken into account if you want to use your SIPP on a foreign property. Plus, if you’re keen to buy abroad, you’ll need to factor in a few more stages that will also incur costs, such as:

  • Local taxes.
  • Fluctuations in local currency.
  • Translation services (for documents and to assist communication).
  • Letting agent fees if you’re letting it out.
  • International broker if you’re using one.

For more information about buying a property overseas, visit the international mortgages page on our sister website Online Mortgage Advisor.


Are there any risks to buying a holiday home with a SIPP?

If you’re considering purchasing a holiday property with a SIPP, there are potential risks that you should be aware of, including…

Diversity

Having a pension portfolio of different investments is the most reliable way to ensure your money is protected, as if one investment suffers, you have the others to manage, which will hopefully continue to grow.

If, however, you decide to use your pension pot on a second property, then you’re putting your trust into one industry, the property market, so you’ll lose the benefits of your money being exposed to wider financial markets.

Fees

Buying a property with a SIPP will incur costs that you should know about before you commit. Typical (pension rules vary between providers), you should be able to withdraw 25% of your pension pot tax-free, but anything over that, which you’ll usually need to buy property, will incur heavy income tax bills, depending on what tax bracket you’re in. This could be a minimum of 55% of what you’ve invested.

Inheritance tax

It’s essential to consider what happens after you die. Whatever pension you have left won’t be subject to inheritance tax but when it comes to property, after you die it will become part of your estate and that will be affected by inheritance tax.


Speak to a pensions expert

If you have questions regarding buying a holiday home with a SIPP and want to speak to an expert for the right advice, call us today on 0808 189 0463 or make an enquiry here.

We work with credited advisors who understand the pensions market so sit back and let us do all the hard work in finding the pension advisor with the right expertise to offer guidance on your circumstances. We don’t charge a fee and there’s absolutely no obligation.

We can arrange a free pension review for you today

70% of customers who have a pension review find a better deal

We can arrange a free pension review for you today

70% of customers who have a pension review find a better deal

Author:
Tony has worked in a vastly diverse array of areas in the pensions industry for over 2 decades. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events. Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been "Hope for the best, but PLAN for the worst", and believes that the biggest impact that an adviser can have on a client's life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they WANT their retirement to be.

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