Borrowing through my Pension Fund


My last articles covered the available funding mechanisms for your business followed by an insight into the Lender’s decision-making process.

In this article we explore the options available to buy real estate assets through a Self-Invested Personal Pension (“SIPP”) or Small Self-Administered Scheme (“SSAS”), the state of the lending market with regards to buying property via a SIPP or a SSAS and over the last 12 months, an update on what’s changed.

Having spent more than 30 years with a mainstream lender, we asked David Whitehead, Consultant with Commercial Sense Ltd brokerage, and expert in the pension lending market to give us his view:

David Whitehead's view

“Buying commercial property through a pension scheme remains extremely popular for owners of SMEs and property investors alike, given the stable values and retirement planning benefits.

However, there are pitfalls, and we always recommend that clients seek professional financial advice from a qualified adviser. The role of the professional trustee, especially one that is experienced in helping clients acquire commercial property, is also vital.

So, what if a pension scheme does not possess adequate liquidity to acquire the property outright?

Searching for a bank that will lend to help make these plans a reality can be a minefield.

The first port of call could be the client’s own bank. That’s because they will have a history of transactions and a financial profile built up over time.

But what if their bank doesn’t have the appetite to lend? Where does the client go then? Or could there be a better deal out there than their own bank offers?

The client could trawl around many different banks trying to find the appropriate point of contact who understands what a SIPP or SSAS is. They then, crucially, must find someone who knows how to lend to one!

Alternatively, they could save time by approaching a commercial finance broker who has access to the whole of the market. This person will be on the panel of many lenders that can pick up an application, usually within 24 hours, and provide a steer as to whether this is a deal for them or not.

Of course, I am biased towards the latter option! However, there are many upsides of using a commercial finance broker.

Some lenders will pay an introductory fee to the broker when the loan draws. As far as our brokerage is concerned, this is rebated against the fee we charge the client (although other brokers may have a different approach). Any FCA regulated broker will fully disclose this fee in advance, so the client is aware of what fees are payable before committing themselves.

The high street banks tend to be the cheapest, but their risk appetite is narrow. So, the fact that there is a growing number of established and challenger banks in the secondary tier is encouraging.
Issues such as tenant quality, break clauses, and short lease terms tend to rule out many transactions for the high street lenders, as do many property investment (third-party tenant) deals. Conversely, this emerging group of nonhigh Street bank lenders take a more pragmatic view with comfort derived from the under-leveraged position and the wider pension scheme assets.

Looking back since this time last year, the standout difference is that lending is more expensive with successive interest rate rises providing a Bank of England Base Rate (“Base”) today (time of writing) of 5.25%, an increase from 1.25% compared to July 2022. Up until the publication of the recent inflation figures, many commentators believed further small increases but since we have seen a pause it is now predicted to decline during 2024 although not to the historic lows that we’ve seen in recent times.

As far as the lending market is concerned, there is still good appetite to lend to SIPPs and SSASs against the security of commercial property and I haven’t seen lenders pulling out of the market or any other major change apart from price. The number of enquiries I have received has remained constant.

The overwhelming feedback I receive from clients is that the reasons to borrow via a SIPP in the first place remain very advantageous and outweigh any increases in borrowing costs.

It is fair to say that some lenders are adopting a more cautious approach towards the sectors in which the tenant business operates but this is not necessarily across the board. Lenders’ policies tend to be driven by the amount of exposure each has to specific industry sectors rather than reducing appetite against those industries that tend to suffer historically during an economic downturn, although the latter can occur.

The cost of debt in terms of interest rate margins over Base and arrangement fees have generally remained constant. It is still possible to find rates less than 3% over Base for certain deals and arrangement fees are unchanged. Fixed rates are subject to market forces and had come down over the last few months until the publishing of the recent inflation figures which have checked this slightly.

However, it is the increase in Base itself that has driven the key change over the last year as the monthly repayments are now higher affecting affordability calculations meaning less can be borrowed to meet lenders’ multiples.

  • Lenders are still happy to support good lending propositions and the appetite and pricing tends to fall into three main groups:
  • Primary lenders – typically the High Street banks that tend to be the cheapest but the most risk averse with preference towards more vanilla deals. Preference here is for “owner occupier” transactions where the SIPP member’s business is the tenant. Lease details are important, particularly remaining term and the presence of break clauses with some lenders not willing to lend beyond a break let alone expiry. They will look at a “property investment” transactions where a third party tenant is in situ but preference is for blue chip tenants, whatever they are these days! Loan to value in such cases drops to around 50% whereas owner occupier transactions are typically around 70%.
  • Secondary lenders – this group is made-up of specialist lenders and startup or challenger banks, also known as fintechs. They are slightly more expensive than the High Street but tend to have a more pragmatic risk appetite with less emphasis around whether the transaction is owner occupier or property investment and also less concerned around expiring leases and break clauses
  • Alternative lenders – it’s probably unfair to say that this category is the catch all group but it contains a diverse group of lenders offering bridging finance, development finance, asset finance, invoice discounters and other specialist or niche lenders. They are the most expensive lenders but their facilities are short term, typically up to three years, and their appetite is far broader than those in the previous two groups. They tend to be smaller firms, including private lenders, that have more agile underwriting functions that can look at more complex or unusual transactions and therefore make quicker decisions.


One of the key issues in the SIPP lending market is a lack of lenders willing to support at the lower end of the value chain. There are only 4/5 lenders, across all three groups above, that will get out of bed for a loan of less than £250,000. I appreciate the same level of work goes into a loan of £100,000 as it does one of £500,000 but this is, in my opinion, the safest sector a lender could ever operate within and it is very surprising that more do not have the appetite to lend to pension schemes.

They will do so at these lower levels to non-pension borrowers which do not carry the levels of comfort a pension lend provides such as not being able to over-leverage given the value of wider scheme assets and the 50% HMRC rule plus third party oversight by the professional trustee, many being FCA regulated if a SIPP to name two key advantage over traditional commercial lending. We continue to search for new lenders willing to lend to pension schemes to increase competition and more options for clients.”    –  David Whitehead Commercial Sense Ltd.


Thank you David for that insight and if you wish to explore this avenue further then please contact me directly or through biz4Biz and I will be able to point you in the right direction.

Ian Taylor biz4Biz Associate

About the Author

Ian Taylor is a highly experienced Business Advisor and Financial Services Professional, with more than thirty years’ expertise in Senior Executive roles with Barclays and BNP Paribas: building successful and award winning teams, developing robust, long term client relationships, and leading a series of complex market related projects to support clients to grow.

Amongst extensive professional training, highlights include successfully completing the Larger Corporate Business Programme at Henley Management College as well as the prestigious Insead CEDEP General Management Programme. Ian is an Associate of the Chartered Institute of Bankers.

Share this post

Further reading