Buying a woodland in a SIPP
Did you know that it might be possible to buy a woodland with your pension fund?
A “SIPP” (Self Invested Personal Pension) fund is a form of personal pension that gives you greater freedom over the type of investments you can put money into to create your “pension pot”. This is sometimes called a “DIY pension” because, unlike a traditional private pension fund where investment options are limited to the funds run by the provider, you are in control, and you can choose to buy a very wide range of assets using a SIPP – including pieces of woodland.
Your financial adviser should be able to highlight the advantages of using a SIPP, but, usually, the money you put in receives income tax relief, a policy designed by the government to encourage people to save for their retirement. SIPPs have been regulated by the Financial Services Authority (FSA) since 2007, and the number of providers offering them has increased significantly in the last few years.
Financial advisers can tell you if the regulations governing SIPPs, that any property you invest in has to be commercially managed, may also apply to buying a woodland. You will need to show it is a commercial woodland rather than an amenity woodland (one owned purely for recreation).
They may look at different ways of demonstrating the commercial usage such as Receiving an income from timber or other woodland products
- Creating a management plan that emphasizes the generation of profit as an objective
- Employing a professional forestry manager
- Maintaining a separate bank account for the woodland and registering for VAT
Overall, the fact that the financial value of woodland usually appreciates over time, as well as the favourable tax status of investing through a SIPP, can make woodland an attractive addition to a SIPP portfolio. Please check your personal situation with your financial adviser.