Buying a yacht berth with your pension pot

Whitelighter

Whitelighter

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I had a quick google and this was asked on the forum waaaaay back in 2002 but things have changed so maybe its worth asking again.

I'm seriously looking at putting a boat out in the med and there are a number of berths for sale. This article (which i read in print but found through a search) http://www.telegraph.co.uk/finance/.../How-I-bought-an-airport-with-my-pension.html suggests that a yacht berth could count as commercial property. Obvioulsy I could just go and rent a berth but if i'm going to pay rent, why not pay it to my pension?

The marina Im looking at has a berth for sale at €25,000 with 22 years left on the lease. A commercial rental rate is around €4,000 per year including the mx charge. Seems like a reasonable return and as I say, if im going to pay it anyway why not make my pension the beneficiary.

Some more detail here from another article http://www.whatinvestment.co.uk/inv...77/sipp-rules-and-regulations-explained.thtml
 
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If that is possible it sounds like a really good idea. Sorry no help to you whatsoever but just thought I would mention it!
 
There will probably be a service charge on an owned berth, could be as much as 3k euros for a 12m berth in parts of Spain. Plus power and water. The other thing to consider is whether you would want to stay put for several years or more, and whether you would be able ro resell the berth. Many marinas do not allow owners to sublet direct.
 
A colleague has used his SIPP to buy a campsite which his wife currently manages and he will eventually manage with her in a couple of years time. He somehow got the SIPP to borrow as well but buying a berth sounds a whole lot easier and I think is achievable with the right professional advice. Campsite in Wales

Be interested to watch your progress as I have had similar thoughts but never really developed the idea.
 
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Direct investment in overseas property is not allowed .

At the inception time arround 2004 /5 ish --- there was a lot of hullabaloo but the then chancellor G Brown -at the 11 th hour - poo poo,d overseas property .Think about it a Labour Gov -fuelling a middle class over sea holiday second home boom -Most likely - Tory voters using HMRC to gain tax relief on holiday home -or in this case boat mooring
That's my understanding but happy to be corrected .
 
PlanB said:
There will probably be a service charge on an owned berth, could be as much as 3k euros for a 12m berth in parts of Spain. Plus power and water. The other thing to consider is whether you would want to stay put for several years or more, and whether you would be able ro resell the berth. Many marinas do not allow owners to sublet direct.
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Service charge is €1400/year.

Subleting or reselling is permitted FOC by the marina, provided they get first refusal. The berths I am looking at are both resale options.
 
Portofino said:
Direct investment in overseas property is not allowed .

At the inception time arround 2004 /5 ish --- there was a lot of hullabaloo but the then chancellor G Brown -at the 11 th hour - poo poo,d overseas property .Think about it a Labour Gov -fuelling a middle class over sea holiday second home boom -Most likely - Tory voters using HMRC to gain tax relief on holiday home -or in this case boat mooring
That's my understanding but happy to be corrected .
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Interesting.

Certainly both articles linked to suggest that it is possible but then Journalists are not always as accurate as one would like. Though they do both make specific references to SoF berths and the issues with buying property in Spain/France. I wondered if any of the SoF Glitterati on here had thought about it/done it
 
IMO, the key to "owning a berth" (long lease) is having a lease long enough to amortise the annual charges.

Our 20m berth cost 70,000 euros plus some VAT (IVA) - not the full VAT rate - I can't remember the actual VAT rate but say it was a total of 76,000 euros.
The lease was for 30 years.
So, thats 2533 euros per year plus a service charge which was about 2500 euros pa
So a 20m boat in the Med was going to cost me less than £4000 (sterling) pa including all my electricity and water.
That was 8 years ago.
In fact, these figures have turned out to be, more or less, exactly that.
On the Hamble, a berth like that would have cost me 4 or 5 times that figure.

Having said that, when our marina opened, a number of people bought long leases in the hope that the value of the berths would appreciate.
This has not been the case.
It seems that they have made some money but if you don't have a boat to put on the berth, it has been a moot point that it was worth the investment.
Someone once told me that it was like owning a race horse - you have to keep feeding it.
That comment means that even if there isn't a boat on a berth that you buy, you still have to keep paying the service charges.

Taking that all aside, 25k euros for a 12m berth seems a good deal.
If it is where I think it is, there is another 22 years left to run.
I can't think of any cheaper way to keep a boat.
IMO - go for it.
 
Portofino said:
Direct investment in overseas property is not allowed .

At the inception time arround 2004 /5 ish --- there was a lot of hullabaloo but the then chancellor G Brown -at the 11 th hour - poo poo,d overseas property .Think about it a Labour Gov -fuelling a middle class over sea holiday second home boom -Most likely - Tory voters using HMRC to gain tax relief on holiday home -or in this case boat mooring
That's my understanding but happy to be corrected .
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There is a subtle difference here.
The berth isn't actually a purchase.
It is a lease for xx years.
That may be significant.
 
At the start HMRC issued a list of suitable vehicles for folks to place inside the "tax wrapper".
Recently this list as been recinded -due to issues with rows over deffintions etc resulting in FSA having to bollock off certain SIPP providers .

Hence the suggestion of moorings recently ----

However the underlying basic rule that has Allways been in ,or helps define what's allowable is I understand this --------
If you gain a benefit or use personally then it's disallowed .

For example a piece of art hanging up in your house , a classic car in the garage etc , or your own personal home -which is residential property .
Take a camp site -your SiPP can buy the field , loan Money to do it up new tiolet block ,but you actually do rent out pitch,s to the public -that's fine ,You pay the SIPP the rent .
But if you buy a field ( same one ) and make a "camp site " whereby you are and will be the only client ,ie no public then that will be disallowed .
boat mooring -suppose technically yes if you are NOT going to personally have a benefit ie use it solely for your self !
I guess if you bought some moorings in a marina and then by way of a buisines rented them out to joe public -then maybe you could wrap that all up in a SIPP but the income will have to go into the SIPP ,untill you are 55 -then you could draw down .
But I do not think you could place a mooring In to a SIPP for solely personal use -fails the personal use /gain test ,along with foreign holiday homes .Even if you do faux rent out the odd week or so
Well that's my understanding .

Re SoF brigade and foreign property ownership
There is also a general lifetime allowance -LTA reducing now £1-2 M from memory ,of the value of your pension pot ,once over this limit
You end up paying tax on the excess .-best not to go there !
So if you where to somehow convince HMRC that its really a comercial venture ( think the camp site argument ) even with a small amount of token rent ,then this property value may end up busting the LTA .
So over and above arguing with HMRC re personal use /gain ,most folks in this position have allready reached there LTA .

Well that's my understanding -from experiance
 
Whitelighter said:
It wouldn't be token rent. I'd pay full commercial rate for the marina. I think I'll fire some emails off today and see what transpires.
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Sucking eggs time....your emails need to be sent to SIPP firms (HL, James Hay, etc) as they are the people who will permit or otherwise (subject to HMRC rules) you to have the berth as an asset. Remember they have to do mundane things such as value the asset each year.
 
petem said:
Sucking eggs time....your emails need to be sent to SIPP firms (HL, James Hay, etc) as they are the people who will permit or otherwise (subject to HMRC rules) you to have the berth as an asset. Remember they have to do mundane things such as value the asset each year.
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That's far from sucking eggs, very useful. Thanks pete
 
I think that some people are getting themselves a little bit confused here - mainly because they are confusing 'SIPP Rules' with HMRC rules (IRPSM until yesterday).

1. There is nothing within HMRC rules they specifically disallows SIPP investment into commercial property abroad - but your SIPP provider (especially if it's one of the big off the shelf providers such as H/L, AJB etc.) may well disallow it under their own in-house SIPP rules ('The Scheme Rules'). The answer to that is simple - don't go with those providers!

2. There is nothing to prevent dealing between an individual and his SIPP providing it is an arms-length commercial transaction on market-rent based terms. So yes, it is possible.

3. There is no longer a need (since 'A' day 2006) to have professional Trustees (so you don't actually need anybody else dictating your permitted investments, you can just take professional advice as to what is permitted) - but you will need a professional Administrator - N.B. Administrator not Trustee!

If you have (or are willing to form) a Ltd. Company then a SSAS may well be better than a SIPP - and if you are thinking of moving abroad (you don't actually have to do so, you just have to have the intention to do so at some time in the future) then there is even the QROPS route (though this is under review from HMRC as of last month).
With a SSAS, you can even get the pension fund to loan your company the money to buy the berth and then the company can pay back the SSAS at capital plus interest over 5 years (at high street bank interest + 1%).
You will not get any of this with an 'off-the shelf' SIPP - but you can do it perfectly legitimately - I have been doing so for 15 years or so. Our Care Homes are held within SIPP's (Bricks & Mortar only, no FF & Goodwill) and our other investments are in a SSAS. We are the Trustees ourselves.

If the emails that you fire off are to the mass market SIPP providers then you will almost certainly receive a negative reply saying "It isn't permitted under SIPP rules" - what they are not telling you is that these are their own in-house rules (designed for their convenience not yours). The revaluation period is three years not one year BTW.

In short, what you need to achieve is investment into a scheme which has 'Scheme Rules' that have been accepted by HMRC but are also acceptable to you! As an example, this is what our scheme rules say on the matter;

5.5 The Trustees have full powers of investment and application including all such powers which they could exercise if they were absolutely and beneficially entitled to the Fund. In particular and without prejudice to the generality of the foregoing the Trustees may invest or apply all or any part of the Fund in any part of the world:

I am not an IFA by the way, so the above is not financial advice - it is idle useless gossip and hearsay!

Steve
 
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drumbeat said:
There is nothing within HMRC rules they specifically disallows SIPP investment into commercial property abroad - but your SIPP provider (especially if it's one of the big off the shelf providers such as H/L, AJB etc.) may well disallow it under their own in-house SIPP rules. The answer to that is simple - don't go with those providers!
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The problem is that this investment be be classed as an "Unauthorised Payment" and may then become subject to tax - see https://www.gov.uk/pension-trustees...ules-for-investment-regulated-pension-schemes.

drumbeat said:
The revaluation period is 3 years not 1 BTW.
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If I remember correctly it depends on the age of the policyholder and whether the SIPP is in Drawdown. But that's detail, as you point out you need to find a SIPP administrator who will allow a yacht berth as a permitted asset.

Pete
 
petem said:
The problem is that this investment be be classed as an "Unauthorised Payment" and may then become subject to tax - see https://www.gov.uk/pension-trustees...ules-for-investment-regulated-pension-schemes.



If I remember correctly it depends on the age of the policyholder and whether the SIPP is in Drawdown. But that's detail, as you point out you need to find a SIPP administrator who will allow a yacht berth as a permitted asset.

Pete
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Absolutely correct Pete - which is why I said that, as our own trustees, we take professional advice as required (paid for by the fund) to make sure that we only deal in 'qualifying investments'. (All investments are 'permitted' - but they don't necessarily qualify as you say!). We take the advice re HMRC qualification - consult our own Scheme rules - and then it is entirely our decision as to whether we proceed.

If there is an issue with Yacht berths, it won't be anything to do with it being abroad (with HMRC) - I Suspect that it might be that it could be described as as a non-tangible asset or 'plant and machinery' (non - qualifying) - but that would still leave the SSAS loan-back route open. If the berth lease was 50+ years that would probably solve it too.

Steve
 
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drumbeat said:
Absolutely correct Pete - which is why I said that, as our own trustees, we take professional advice as required (paid for by the fund) to make sure that we only deal in 'qualifying investments'. (All investments are 'permitted' - but they don't necessarily qualify as you say!). We take the advice re HMRC qualification - consult our own Scheme rules - and then it is entirely our decision as to whether we proceed.

If there is an issue with Yacht berths, it won't be anything to do with it being abroad (with HMRC) - I Suspect that it might be that it could be described as as a non-tangible asset or 'plant and machinery' (non - qualifying) - but that would still leave the SSAS loan-back route open. If the berth lease was 50+ years that would probably solve it too.

Steve
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That's a lot of hassle for a £20k berth though isn't it! OK, if part of a multi £ mil investment portfolio.

Anyhow, whilst we're on this topic, I was wondering about the economics of buying a BTL in Port Solent and using the accompanying mooring myself. The horseshoe flats have pretty horrendous management charges (for the upkeep of the pool etc) but you might make a house work with a remote mooring. Obviously not SIPPable and I'm not sure how you'd calculate the income tax as there would be an element of personal use of the property.
 
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