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Invest in Commercial Property to Maximise Your Pension

commercial property investment

In this blog, Director Barry McKenzie, explores an interesting investment option for your pension in relation to commercial property. Read on to find out how you can maximise your finances in retirement.


Pensions and Commercial Property

Recognising areas of potential growth has been made difficult in recent years, with our finances adjusting to the current interest rates and markets. But a focus on the investment options available in your pension can help build confidence for your future retirement, even in uncertain times.

One of the investment options in a pension is the ability to use your pension funds to purchase commercial property. This can be in the form of a direct purchase of commercial property or as part of a larger pooled investment.


How Does Investing in Commercial Property Work?

At Melville Independent Plc, we regularly help our clients set up the appropriate pension scheme for them which aligns with their financial goals. The pension scheme would then be used to purchase a commercial property.

To avoid risks, careful consideration is required around the overall property value and securing financing. While aspects such as market fluctuations and property management challenges are not to be ignored. The commercial property could be a client’s business premises or a number of other locations which are a good investment opportunity.

A significant feature of a business owner purchasing their premises within their pension would be the potential release of capital back into the business when the property is sold, helping cashflow of the business.

Benefits of Investing in Commercial Property

Once inside the pension, an open market rental income is paid to the pension scheme, this then increases the pension fund value.  The business would then have to pay the rent to the pension scheme, however this rent could be treated as a business expense for tax purposes.

Other factors, which make this a viable option for clients is the potential capital appreciation of the property over the longer term which could also benefit the pension fund value. And as this is within a pension, this growth is free from Capital Gains Tax.

If the pension fund was not large enough, the facility to borrow funds towards the purchase and development of the property is available within a pension fund, and the rental income could be used to repay this loan.

Also if the pension funds needed to be topped up, contributions can be made personally and benefit from the generous tax relief available, or indeed the underlying employer could make these if appropriate.

What Commercial Properties are acceptable?

We have to be mindful of the types of acceptable properties, as the rules surrounding this are strict. Some examples of acceptable properties are:

› Offices

› industrial/business units and warehouses

› Shops

› Agricultural land

› Land for commercial development

› Garages

› Nursing homes

› Hotels


For clarity, some examples of unacceptable properties are:

› Residential Property

› Holiday lets



Always Seek Investment Advice

Purchasing a commercial property within a pension fund is not without risk, and its important to align your financial strategy with your long-term retirement goals. We have been advising clients in this area for many years and have built up a strong reputation helping our clients meet their needs.

As mentioned the rules surrounding this are complex. We would always suggest that you take specialist advice in relation to this and we would be happy to discuss your options further.

You should always bear in mind the main reason for having your pension is to support you financially in your retirement, so whether commercial property is of interest or not, a review of your pension arrangements is a worthwhile exercise to carry out to ensure your retirement is a comfortable one for you.


December 2023


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Barry McKenzie



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