Pensions and property remain two of the most widely used long-term wealth-building tools in the UK. Individually, each offers tax advantages, stability, and long-term growth potential. Naturally, many investors ask whether the two can be combined to accelerate outcomes or improve capital efficiency.
The short answer is yes—but not in the way many initially expect. Direct residential property purchases using pension funds remain firmly prohibited. However, when structured correctly, pensions can play a powerful supporting role in commercial property acquisition, development funding, and long-term portfolio strategy.
In 2025, this area has become increasingly relevant. Rising development costs, tighter bank credit, and greater scrutiny around personal borrowing have pushed experienced investors to look inward—towards existing capital pools, including pension assets, to support property ambitions.
At Willow Private Finance, we regularly advise directors, developers, and business owners who are sitting on substantial pension balances but have never explored how those funds might work harder alongside their property strategy. When done correctly, pension-backed property structures can be highly efficient. When done incorrectly, the consequences can be severe.
HMRC rules are explicit. Pension schemes cannot be used to purchase residential property, whether for personal occupation or buy-to-let investment. This includes houses, flats, holiday lets, and second homes, regardless of whether the property is rented out at arm’s length.
Attempting to acquire residential property directly through a pension can trigger unauthorised payment charges, scheme sanction charges, and additional penalties that can exceed 70% of the value involved. These rules have not softened in 2025, and enforcement remains strict.
This is often the point where investors assume the conversation ends. In reality, it is where the more strategic opportunities begin.
While residential purchases are prohibited, pensions can be used to acquire commercial property or provide secured funding to businesses involved in property development or investment. The most commonly used structures are Self-Invested Personal Pensions (SIPPs) and Small Self-Administered Schemes (SSAS).
Both structures allow greater control over how pension assets are invested, but they serve different purposes depending on the investor’s profile, business structure, and long-term objectives.
A SIPP is a personal pension that allows the holder to make a wider range of investments than a traditional pension arrangement. In a property context, SIPPs are most commonly used to acquire commercial property outright.
This might include offices, warehouses, industrial units, retail premises, or land with a genuine commercial designation. The property is held within the pension wrapper, and rental income flows back into the pension tax-free. Any capital growth achieved while the asset remains inside the pension is also free from capital gains tax.
SIPPs are particularly attractive to sole traders, professionals, and directors who want a straightforward structure without involving multiple scheme members. They are also frequently used where a business rents its own premises from the pension, effectively recycling rent back into the owner’s retirement fund.
SSAS arrangements tend to be more flexible but also more complex. A SSAS is established by a limited company and typically covers directors or family members involved in the business. One of its most powerful features is the ability to lend money back to the sponsoring employer.
In 2025, SSAS loanbacks remain permitted under strict conditions. The loan must be secured, interest-bearing, and limited to a maximum of 50% of the scheme’s net asset value. When structured correctly, this allows pension funds to provide development finance or working capital to a property business without relying solely on external lenders.
This approach is often used to support commercial acquisitions, refurbishment projects, or commercial-to-residential conversions carried out by the trading company rather than the pension itself.
Only genuinely commercial property can be acquired directly by a pension scheme. This includes assets such as offices, industrial buildings, retail units, logistics space, and commercial land. Mixed-use assets can sometimes be acceptable, but the commercial element must be dominant and clearly defined.
Residential assets, even when used temporarily or intended for future conversion, remain prohibited while held within the pension. The classification at the point of purchase is critical and must be supported by appropriate valuation and legal advice.
Although pensions cannot own residential property, they can support residential strategies indirectly through business lending and development activity.
A common example involves a SSAS lending funds to a development company owned by the scheme members. The company uses the loan to acquire or convert a commercial building into residential units. The pension benefits from a secured, interest-bearing loan, while the company retains flexibility to develop and sell or retain the residential assets outside the pension.
This structure is increasingly used in 2025 as a way to reduce reliance on high-cost development finance while keeping pension growth aligned with business activity.
Pension-backed property strategies are not casual arrangements. Every transaction must be carried out at market value, supported by independent valuations, and documented correctly. Loans must meet HMRC requirements in full, and the pension scheme must be administered by a regulated trustee or administrator.
Mistakes in this area are costly. HMRC does not differentiate between deliberate abuse and poor structuring. This is why experienced coordination between pension specialists, lenders, solicitors, and advisers is essential.
At Willow Private Finance, we work alongside specialist pension trustees and administrators to ensure funding structures are viable, compliant, and aligned with lender expectations where external finance is also involved.
Pension-backed property funding often sits at the intersection of lending, corporate structure, and long-term planning. It is rarely a standalone decision and frequently forms part of a broader acquisition, refinancing, or development strategy.
Willow Private Finance supports clients navigating these structures by coordinating with pension advisers, assessing lender appetite where leverage is required, and ensuring that funding decisions remain commercially and practically viable. Our experience spans complex commercial assets, development-led strategies, and director-led business funding across the UK and internationally.
Q1: Can I use my pension to buy a buy-to-let property in 2025?
No. Residential property purchases through pensions remain prohibited and can trigger severe tax penalties.
Q2: What type of pension can hold commercial property?
Both SIPPs and SSAS structures can hold commercial property, subject to scheme rules and trustee approval.
Q3: Can my business rent property owned by my pension?
Yes. Many directors rent commercial premises from their pension at market value, with rent paid back into the scheme.
Q4: How does a SSAS loanback work?
A SSAS can lend up to 50% of its value to the sponsoring employer, provided the loan is secured and interest-bearing.
Q5: Is pension-backed development finance accepted by lenders?
It can be, but lenders will assess the structure carefully. Early coordination is essential.
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About the Author
Wesley Ranger is the Director of Willow Private Finance and has over 20 years of experience advising clients on complex property finance strategies. He specialises in high-value lending, commercial property finance, and bespoke funding structures involving company directors, investors, and international clients. Wesley regularly works alongside pension specialists, private banks, and alternative lenders to structure compliant solutions where traditional borrowing falls short.
Important: Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other loan secured against it. Think carefully before securing other debts against your home. Some buy-to-let, commercial, and bridging loans are not regulated by the Financial Conduct Authority. Equity release may involve a lifetime mortgage or home reversion plan—ask for a personalised illustration to understand the features and risks. The content of this article is for general information only and does not constitute financial or legal advice. Please seek advice tailored to your individual circumstances before making any decisions.
