Article 26 in a series of 40 articles on P2P, property and CrowdProperty.
The previous blog reviewed why it’s important to have independently verified data, and how we approach that. Below, we explain how you can invest in CrowdProperty through your personal pension and next we’ll explain why speed of drawdowns during a development seems obviously important but is too often overlooked.
In Sense and Sensibility – which is almost as widely read as this blog - Jane Austen wrote: “People always live for ever when there is an annuity to be paid them”. Things have changed a little over the ensuing two centuries, and if you’re hoping to survive on an income stream from an annuity based on UK gilt yields, your needs had best be modest.
Those looking for an income above that which would support a Napoleonic pauper have instead sought higher-yielding assets, of which residential property is one.
Can I have residential property loans in my pension?
If you want to do this with the greatest efficiency, it’s not only your ISA that can bring you tax-free returns from CrowdProperty. P2P property investment can be held in pension accounts, such as a Self-Invested Personal Pension (SIPP) and Small Self-Administered Scheme (SSAS).
In most pension accounts – for instance, SIPPs – it’s not possible to hold residential property directly. We get queried frequently about this, particularly in the case of repossession in the event of loan default, as lenders are worried that the asset will fall to them personally. That’s not the case. The reason is that, in such an event, ownership transfers to CrowdProperty as agent for the lenders, not the lenders themselves. So our lenders always hold the loan, and not the property, meaning it is an allowable SIPP and SSAS asset under HMRC rules.
This is therefore a great way to build residential real estate assets as part of your diversified pension portfolio. You can get more information here, but below is a brief summary.
Option 1: SIPP
SIPPs are designed for those confident in making their own investment decisions. As such, they offer the ability to invest in the full range of options approved by the government. SIPPs work in much the same way as other personal pensions: you add money as and when you choose, and the government pays in an extra 20% in pension tax relief.
However, note that you will need to check with each SIPP pension provider as to whether they authorise P2P lending. Some SIPP providers are unsure about incorporating P2P loans, as they’re unfamiliar with the asset class. While momentum is building to have more asset classes wholesale approved to be included in the SIPP wrapper, and P2P loans are moving into the mainstream (especially as they’re already recognised within the Innovative Finance ISA tax-wrapper), things move slowly in the SIPP world. Watch this space, though, because we are also building our own SIPP product to make it even easier for you to invest your pension directly into CrowdProperty.
Option 2: SSAS
The SSAS is a specialised type of pension scheme, offering great flexibility - and frequently more independence - than a SIPP. They are often set up to provide retirement benefits for company owners and/or directors. The scheme can have up to 11 members and is open to all employees and family members. Given its greater flexibility than the SIPP, it is likely to be more easily approved to hold P2P loans within this wrapper.
AutoInvest
Whichever pension wrapper you choose, it will pay to look at CrowdProperty AutoInvest for Pension, our latest and easiest way to invest tax free.
CrowdProperty AutoInvest is a stress-free way to ensure you’re investing in every high-quality, first charge secured project we launch on our platform. We’ve built AutoInvest to save you time and effort, and to help you build a highly diversified investment portfolio, without platform or financial adviser fees.
AutoInvest for Pension works in the same way as AutoInvest for your standard or ISA account, with the main difference being that we've been working with pension administrators behind the scenes to design the process that fits with regulations and all parties’ systems to deliver the best product for you.
If you are interested in holding CrowdProperty in your pension, whether you currently have a SIPP/SSAS pension or not, please complete this form. Where we have an existing relationship with your pension scheme administrator, we can liaise with them on the process for you (we already have many pension SelfSelect lenders on board) and where we do not, we will be able to provide them with the detailed information on CrowdProperty that they will require.
When it comes to P2P loans and pensions, CrowdProperty’s answer is a resounding ‘yes’. Which seems only sensible.
Benefit from more choice with your pension investments through Pension Lending: www.crowdproperty.com/pensions
Download our SSAS Pension Lending Guide: www.crowdproperty.com/ssas-guide
Learn about stress-free investing with AutoInvest: www.crowdproperty.com/autoinvest
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