Introduction: Using Your Pension To Buy Commercial Property
This article is a comprehensive 2026 UK guide to raising a mortgage when commercial property is held inside a self invested personal pension or a small self administered scheme. Whether you’re looking to acquire new premises or refinance an existing pension-owned asset, understanding how mortgage finance works within these pension structures is essential.
Here at Fox Davidson, we arrange commercial mortgages secured on property owned by, or being acquired by, SIPP and SSAS pension schemes. We work with a lenders across the market who understand the additional complexities involved when a pension scheme is the borrower, and we guide clients through the entire process from initial enquiry to completion. It is important to assess your financial needs when considering property investment through a SIPP or SSAS, to ensure the funding solution aligns with your overall investment goals.
At Fox Davidson, we specialise in arranging mortgages exclusively for pension funds with assets of £1 million or more. As a result, our minimum loan size is typically £500,000 or above. This focus ensures we can effectively manage the complexities and fixed costs associated with lending to larger pension schemes, providing expert guidance and tailored financing solutions.
A SIPP or SSAS can borrow up to 50% of net scheme assets to help buy or refinance commercial premises, including the client’s own trading premises. This borrowing capacity, combined with the tax advantages of holding property within a registered pension scheme, makes pension-based property investment an attractive strategy for many business owners and investors. Holding property within a pension scheme can offer tax efficiencies and asset protection. In addition to property, SIPPs and SSASs allow a range of investments, including shares and other financial instruments.
Please note that this article does not constitute pension or tax advice. We strongly recommend that readers speak with their pension trustees, an independent financial adviser, and their accountant before proceeding with any pension property transaction. All information is current for the 2025/26 and 2026/27 tax years and relates specifically to UK rules and lenders.
What Are SIPP And SSAS Pensions & Why Use Them For Property?
A Self-Invested Personal Pension (SIPP) is owned by a pension provider, while a Small Self-Administered Scheme (SSAS) is owned by the members. SIPPs require an independent trustee to be involved in investment decisions, while SSAS can be managed by the members themselves.
Both SIPP and SSAS pensions fall under the category of investment regulated pension schemes, offering significantly greater flexibility than standard personal pension or occupational pension scheme arrangements. In 2026, these structures remain popular vehicles for holding commercial property, though they serve different purposes and suit different investor profiles.
What is a SIPP?
- An individual pension plan offering wide investment powers
- Normally administered by a specialist pension provider and professional trustee
- Popular with experienced investors seeking greater control over their pension fund
- Can hold various assets including commercial property, shares, and funds
- Can hold a wide range of investments, including property, pooled vehicles, and other financial instruments
- Suitable for self-employed individuals and employees with multiple pension pots
What is a SSAS?
- An employer-sponsored occupational pension scheme, typically for company directors
- Trustees are usually the scheme members themselves (the directors)
- Often used to purchase the company’s own business premises
- Allows the sponsoring employer to make tax deductible contributions
- Provides scheme members with direct involvement in investment decisions
- Can hold a wide range of investments, including property, pooled vehicles, and other financial instruments
Why commercial property is attractive in a pension:
The tax benefits of holding property within a pension are substantial. The primary reason to hold property within a pension fund, SSAS or SIPP is to maximise the available tax advantages. Rental income received by the pension scheme grows entirely tax free, with no income tax payable on the rents received. When the property is eventually sold, there is no capital gains tax on any increase in property value. For business owners, rent paid by their trading business to its own pension is a tax deductible expense, effectively moving taxable profit into a tax efficient pension wrapper.
SIPPs and SSAS can invest in commercial property, allowing for potential capital appreciation and rental income, which enhances the pension’s net value.
Additionally, contributions made to a SIPP can be deducted from profits before they are assessed for tax when renting property to a business.
It’s important to note that HMRC’s taxable property rules mean pensions generally cannot hold residential property directly without incurring severe tax charges (typically 55% or more of the property value as an unauthorised payment charge). This article focuses exclusively on commercial property, which does not trigger these penalties when held correctly within investment regulated pension schemes.
Understanding the tax implications and the need to pay tax on certain investments, such as residential property, is crucial to avoid penalties and ensure compliance with HMRC rules.
The value of a SIPP can be passed onto beneficiaries as a death benefit, which is outside of the estate for Inheritance Tax purposes. However, from April 2027, there is a proposal to bring most pension funds, including SIPP and SSAS, within the scope of Inheritance Tax.
How Borrowing Works In A SIPP Or SSAS (2026 Rules & Limits)
Pensions can borrow to help purchase commercial property, but HM Revenue and Customs places strict limits on how much a pension scheme can borrow, and lenders apply their own lending criteria on top of these regulatory constraints.
HMRC Borrowing Limit
SIPP and SSAS pensions can borrow funds, but only up to 50% of their net assets. The term ‘pension’s net’ refers to the net value of the pension after deducting any existing liabilities—essentially, the pension’s net worth. The maximum borrowing permitted by HMRC is 50% of the pension’s net asset value at the time of borrowing. For example, if a SSAS has net assets of £800,000, the maximum borrowing capacity is £400,000.
This 50% cap applies across all borrowing by that scheme, not per individual loan. If the scheme already has outstanding borrowing, this reduces the capacity for any new mortgage.
Lender LTV Limits
Most UK lenders also apply a loan-to-value limit against the property itself, typically up to around 70-75% of the property’s market value for a commercial mortgage. Some specialist lenders may offer slightly higher LTVs in certain circumstances.
How the Two Limits Interact
In practice, the lower of the HMRC borrowing limit and the lender’s property LTV will apply. This effectively means the pension must usually contribute a substantial cash deposit from existing scheme assets.
Worked Example:
Consider a SSAS with net assets of £600,000 looking to purchase a commercial unit valued at £700,000:
- HMRC limit: 50% of £600,000 = £300,000 maximum borrowing
- Lender LTV limit: 70% of £700,000 = £490,000 maximum borrowing
- Applicable maximum: £300,000 (the HMRC limit is the constraining factor)
- Required pension cash contribution: £400,000 (plus purchase costs)
Borrowing can be structured on a capital and interest basis or, with some lenders, on an interest only basis. The repayment type will depend on scheme rules, trustee consent, and individual lender requirements.
Lending Criteria For SIPP And SSAS Mortgages
SIPP and SSAS mortgages represent a specialised subset of commercial lending, with additional requirements involving scheme administrators, trustees, and compliance with pension regulations. Here at Fox Davidson, we navigate these complexities daily and understand what lenders need to see.
Typical UK Lender Requirements in 2026:
- Acceptable property types: offices, industrial units, retail premises, surgeries, warehouses, and similar commercial uses
- Minimum property value: typically £500,000 or above, though some lenders set higher thresholds
- Property condition: good structural condition with no significant remedial works required
- Location: mainland UK, with some lenders restricting certain regions or excluding Scotland/Northern Ireland
- Valid energy performance certificate in place
Pension Scheme Requirements:
- Established and registered pension scheme with HMRC
- Professional trustee or scheme administrator in place
- Current statement of assets and liabilities provided
- Scheme rules explicitly permitting borrowing and property ownership
- Evidence of the pension plan’s contribution history and cash flow
Tenant and Lease Considerations:
- Full repairing and insuring (FRI) lease expected, with tenant responsible for maintenance
- Market rent confirmed by independent valuation (essential for connected parties)
- Lease term usually matching or exceeding the mortgage loan term
- Where the tenant is the scheme member’s own business, a formal arm’s length lease is mandatory
Income and Affordability:
Lenders assess the rental income within the pension plus any other scheme income against the proposed mortgage payments. Most require an interest coverage ratio of 125-145% when stress-tested at a notional rate above the actual mortgage rate.
At Fox Davidson, we typically handle SIPP and SSAS property finance from £1 million upwards. Smaller transactions often become uneconomic due to the fixed legal, valuation, and trustee costs involved in pension property lending.
Typical SIPP & SSAS Mortgage Terms In 2026
Terms for SIPP and SSAS mortgages are bespoke to each transaction, but there are common ranges across the UK mortgage market that we see regularly.
Feature | Typical Range In 2026 | Notes |
|---|---|---|
LTV (vs property value) | Up to 70-75% | Subject to HMRC 50% of assets cap |
Max borrowing | 50% of scheme net assets | HMRC limit, applies to total borrowing |
Loan terms | 5-25 years | Shorter terms more common |
Repayment types | Capital & interest or interest-only | Interest-only subject to clear exit strategy |
Rate types | Fixed (2-15 years), variable, tracker | Fixed rates popular for pension planning |
Arrangement fees | 1-2% of loan | Typically paid from pension assets |
Valuation fees | £1,500-£5,000+ | Dependent on property value and complexity |
Legal fees (borrower) | £3,000-£10,000+ | Plus lender’s legal costs and trustee fees |
Rates for SIPP and SSAS mortgages are generally in line with mainstream commercial investment or owner-occupied property lending, though often slightly above residential mortgage rates due to the commercial nature of the security.
Rates for SIPP and SSAS mortgages are generally in line with mainstream commercial investment or owner-occupied property lending, though often slightly above residential mortgage rates due to the commercial nature of the security.
Fixed rate products may be available for periods of 5, 10, or even 15 years with certain lenders. Longer fixes can be valuable for pension planning and rent forecasting, providing certainty over cash flows during the fixed rate period.
Key Points to Note:
- Early repayment charges and breakage costs can apply, particularly on longer fixed rates—these must be modelled carefully when planning pension cash flows
- Lenders typically require a first legal charge over the pension-owned property
- Assignment of the lease and rents to the lender may be required as additional security
- All fees and costs relating to the mortgage must be paid from pension assets
Using A SIPP Or SSAS To Buy Your Own Trading Premises
Many of our clients at Fox Davidson use a SSAS or SIPP to purchase their company’s trading premises, with the business then paying rent to the pension. This strategy offers significant tax advantages while building pension value through property acquisition.
The Basic Structure:
The pension scheme purchases the freehold (often with a mortgage to bridge any funding gap). The property is then leased on commercial terms to the trading company. The rent paid by the company is tax deductible as a business expense, while the rental income received by the pension is entirely tax free within the scheme.
HMRC Requirements for Arm’s Length Terms:
- Independent valuation of the purchase price (to confirm market value)
- Independent valuation of the market rent (to avoid any taint of benefit)
- Formal lease documentation prepared by a commercial solicitor
- All terms must be genuinely arm’s length to avoid unauthorised payment charges
Cash Flow Benefits:
The company converts what would be taxable profit into rent payments, which flow into the pension. The pension uses this rental income to service mortgage interest and repay capital. Over time, the mortgage is cleared, and the pension owns the property outright—all funded largely by rent that would otherwise have been taxed as company profit.
Worked Example:
A manufacturing company’s directors establish a SSAS with combined assets of £500,000. They identify suitable premises valued at £800,000:
- Maximum SSAS borrowing: £250,000 (50% of £500,000)
- Pension cash contribution: £550,000 (from existing assets plus new pension contributions)
- Mortgage: £250,000 over 15 years at 6.5% fixed for 10 years
- Annual rent (independently valued): £56,000
- Monthly mortgage payment (capital and interest basis): approximately £2,180
- Annual mortgage cost: approximately £26,160
The rent comfortably covers the mortgage, with surplus cash retained in the pension to cover insurance, maintenance reserves, and scheme administration costs.
This strategy can also work where multiple directors combine their personal pensions into a joint SIPP or SSAS arrangement to achieve the fund value needed for larger property acquisition.
Joint Purchases, Transfers & Refinancing Pension-Owned Property
Property inside pensions is often purchased, held, or refinanced jointly with individuals, companies, or other pension schemes. These structures add complexity but can provide flexibility for clients whose pension fund alone cannot complete a property purchase.
Joint Ownership Arrangements:
A SIPP or SSAS may co-own a property with a company or individual, with each party holding a defined percentage. Rent and running costs are split proportionally according to ownership shares. For instance, a SSAS might own 60% of a property with the sponsoring employer company owning the remaining 40% as a joint owner.
Many pension providers restrict joint purchases to schemes under the same provider or administrator due to the administrative complexity of managing split ownership across different platforms.
Refinancing Scenarios:
- Remortgaging from one lender to another to secure better terms or release equity
- Raising additional borrowing within HMRC limits to fund property improvements
- Buying out a co-owner’s share using a combination of pension contributions and new borrowing
Important Compliance Points:
- All costs relating to the pension’s share (repairs, insurance, legal fees, service charges) must be paid from the pension to avoid taxable benefit issues
- The scheme must retain sufficient liquidity beyond the purchase price to meet ongoing obligations
- Connected parties transactions require particular care and independent valuations
Staged Purchase Example:
A company owns its trading premises worth £1.2 million. Over three years, the directors make maximum pension contributions to their SSAS. Each year, the SSAS purchases a portion of the property from the company at independently valued prices. After three years and with a SSAS property loan arranged through Fox Davidson, the pension owns the entire freehold, with the company now paying full market rent to the SSAS.
Risks, Pitfalls & Compliance Issues To Watch
Borrowing within a pension scheme can be powerful but introduces specific risks that must be carefully managed. This section highlights the key pitfalls we advise our clients to consider.
Liquidity Risk:
- Property is inherently illiquid—selling takes time and market conditions may be unfavourable
- The pension must retain cash to pay scheme benefits, death benefits, and ongoing fees
- Forced sale at undervalue may occur if the scheme runs short of liquid funds
Concentration Risk:
- Heavy exposure to a single property or sector creates vulnerability
- Where the tenant is the member’s own business, both pension and livelihood are linked to the same enterprise
- Consider diversification within the pension’s overall investment strategy
Regulatory and Tax Risk:
- Breaching HMRC taxable property rules triggers severe tax charges
- Non-arm’s length transactions with connected parties can result in unauthorised payment charges
- Scheme sanctions and loss of registered pension scheme status in extreme cases
- All property acquisition must be properly documented and valued
Interest Rate and Refinancing Risk:
- Rates may be significantly higher when the fixed rate period ends
- Lenders may tighten lending criteria, making refinancing difficult
- If property value falls, the pension may have insufficient equity to remortgage
- Plan for various interest rate scenarios in the scheme’s cash flow projections
The Importance of Professional Advice:
We strongly recommend that clients work alongside pension trustees, independent financial advisers, commercial solicitors, and a specialist broker like Fox Davidson. This team approach ensures all aspects of the transaction—pension rules, tax implications, legal requirements, and mortgage finance—are properly coordinated.
How Fox Davidson Arrange Mortgages For SIPP And SSAS Property
Here at Fox Davidson, we specialise in arranging commercial mortgages where the borrower is a SIPP or SSAS pension scheme, or where property is being transferred into a pension structure. We understand the additional documentation, trustee requirements, and compliance considerations that these transactions demand.
Our typical minimum fund size for SIPP and SSAS property finance is around £1 million, reflecting the fixed costs involved in pension property transactions. We most commonly handle:
- Owner-occupied trading premises for business owners and company directors
- Long-let investment property with established tenants
- Multi-let industrial estates and trade parks
- Medical and professional service premises
Our Step-By-Step Process:
- Initial consultation and detailed fact-find covering your financial circumstances and property objectives
- Review of scheme documents, asset schedule, and borrowing capacity
- High-level affordability assessment against HMRC limits and lender criteria
- Approach to our panel of pension-friendly lenders with full submission
- Securing agreement in principle and negotiating terms
- Coordination of valuation, legal work, and trustee approvals
- Completion and ongoing relationship for future property finance needs
We work alongside clients’ existing pension trustees and IFAs, and we’re happy to participate in joint calls with accountants and solicitors to ensure everyone is aligned on the process involved.
Case Study: 2025 SSAS Property Purchase
A group of three company directors with a combined SSAS fund value of £1.4 million approached Fox Davidson to finance the purchase of their company’s headquarters—a modern office building valued at £1.8 million. We arranged a SSAS property loan of £650,000 (within the 50% HMRC limit) on a 15-year term with a 10-year fixed rate at 6.25%. The transaction completed in 11 weeks from initial enquiry. The company now pays £126,000 annual rent to the SSAS, providing strong interest coverage and steady pension growth.
“Fox Davidson made the whole process straightforward. They understood exactly what our pension trustees needed and kept everyone informed throughout. The fixed rate gives us certainty for the next decade.” — SSAS Client, Bristol, 2025
Get In Touch
If you’re considering using your pension to purchase commercial property, or need to refinance existing pension-held property, we’d welcome the opportunity to discuss your requirements. Contact Fox Davidson today for a confidential initial consultation.
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FAQs: Mortgages For Property In A SIPP Or SSAS (2026)
Yes, both SIPP and SSAS pensions can obtain mortgage finance to purchase commercial property in 2026. HMRC permits borrowing up to 50% of the scheme’s net asset value, and lenders typically offer LTVs of up to 70-75% against the property value. The property must be genuinely commercial in nature, offices, industrial units, retail, surgeries, and similar uses all qualify. Residential property is generally prohibited due to punitive taxable property rules.
The maximum your pension can borrow is the lower of two limits: 50% of the pension’s net asset value (the HMRC cap) and the lender’s LTV against the property itself (typically 70-75%). For example, a pension with £500,000 in net assets could borrow a maximum of £250,000, regardless of the property’s value. If that property were worth £400,000, the lender might offer £280,000 (70% LTV), but the HMRC limit would still restrict borrowing to £250,000.
Yes, this is one of the most common uses of SSAS and SIPP property investment. Your pension purchases the premises and leases them back to your trading business at a market rent. The purchase price and rent must be independently valued to demonstrate arm’s length terms. Rent paid by the company is tax deductible, while rental income received by the pension grows tax free—a genuinely tax efficient structure when implemented correctly.
Rates for SIPP and SSAS mortgages are generally comparable to mainstream commercial investment lending. However, the choice of lenders willing to lend to pension schemes is more limited, and legal costs tend to be higher due to additional trustee involvement and compliance requirements. Arrangement fees typically range from 1-2% of the loan amount, with legal fees for both borrower and lender adding several thousand pounds to transaction costs.
Generally, no. HMRC classifies residential property as taxable property, and holding it directly within a pension triggers tax charges of 55% or more of the property value. These charges apply whether or not borrowing is involved. Most pension providers prohibit residential property for this reason. There are limited exceptions for certain types of property (such as student halls with significant communal facilities), but these require specialist advice and careful structuring.
Typical fees include: lender arrangement fee (1-2% of loan), valuation fee (£1,500-£5,000 depending on property complexity), borrower’s legal fees (£3,000-£10,000+), lender’s legal fees (often similar), trustee/administrator charges for processing the transaction, and potential early repayment charges if you redeem the loan before the end of any fixed rate period. All fees must be paid from pension assets rather than personal funds.
A typical SIPP or SSAS property mortgage takes 8-16 weeks from initial enquiry to completion. The timeline is longer than standard commercial lending due to additional steps: pension trustee approval, scheme administrator documentation, compliance checks on connected party transactions, and coordination between multiple professionals. Complex transactions involving joint purchases or property transfers may take longer. Working with an experienced broker like Fox Davidson helps streamline the process involved and avoid unnecessary delays.
Commercial Mortgages for Pensions
To discuss commercial mortgages for property held in a pension such as a SIPP or SASS please get in touch with our commercial mortgage experts.
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Fox Davidson specialise in large loans for commercial property held in a pension fund. Minimum pension fund at time of application £1M We work with funds that lend £500,000 to £100M +
