Family Pension Trust
Property Purchase
Commercial property may be purchased through the Family Pension Trust as part of the trustees' investment strategy to provide retirement benefits. Buying property from an employer associated with the scheme is tax-efficient and can inject valuable cash flow into the business, as well as providing a regular income to the Family Pension Trust in the form of rent.
An independent valuation of the property must be obtained prior to purchase. If there are insufficient funds available within the Family Pension Trust the trustees may borrow to buy the property. The member trustees need to regularly review the property's insurance to ensure that adequate cover is maintained. This insurance will be held in the names of Rowanmoor Trustees Limited and the member trustees and should include adequate public liability cover. Rowanmoor Pensions has negotiated a block property insurance policy for clients, which offers comprehensive cover at competitive rates. Further information can be found in the Property Insurance Key Features.
It is also important to ensure that rent is paid on the due dates and regular rent reviews take place. Please refer to Rowanmoor Pensions for guidance if the trustees are considering property purchase as there are other issues, for example potential contamination e.g. asbestos, which may need to be addressed.
The answers to some of the most common questions we are asked are given below and more detailed information about property purchase can be found in our literature library.
What limits does Rowanmoor Pensions put on property acquisition?
Our Rules are structured in such a way to allow the trustees to invest in any way they wish, as long as the investment does not give rise to an unauthorised payment charge. Providing the investment is genuine and made in the interests of the members and their beneficiaries, the trustees may invest 100% in a suitable property, even borrowing to do so, it's not for us to say no. We will however, need to ensure that the property does not represent an unacceptable risk to the trustees, asbestos and environmental risks for example.
Who can the Trustees borrow from?
We do not stipulate or limit the range of potential lenders. However, Rowanmoor Pensions has agreed a streamlined lending facility with The Royal Bank of Scotland plc. The streamlined administration system, which includes pre-agreed legal documentation, speeds up the process. If borrowing is to be with any other party, all the documentation needs to be individually agreed by Rowanmoor Trustees Limited before the borrowing may proceed.
Can the member trustees use their own solicitor?
Yes. We naturally have links with solicitors highly experienced in this kind of work but we believe the choice has to remain with the member trustees.
Does Rowanmoor Pensions insist on the appointment of a property management firm?
No. We believe the member trustees themselves are best placed to make the decision as to whether to manage the property themselves, or who to retain to do so if they do not.
Will Rowanmoor Pensions consider joint ownership ventures?
Yes, although we do suggest caution be exercised. As simple a structure as possible is preferable, which should be backed up by clear documentation outlining the responsibilities and obligations of all parties.
How can the Trustees manage the unexpected, such as death of a Member?
Although Pension Term Assurance is no longer available, it is still possible for the trustees to effect life assurance cover on the members' lives, to cover a mortgage liability for example.