How Much Pension Do I Need to Buy a Commercial Unit?

The most common reason people assume SIPP property is "not for them" is that they picture needing the full purchase price sitting in one pension. In reality, three things close the gap: combining old pensions, the SIPP's ability to borrow up to 50% of its assets, and buying jointly with a business partner or spouse. Here is the arithmetic, in full, with nothing hidden.

Start with the true cost, not the asking price

The pension must cover everything, not just the price on the brochure:

1. Purchase price of the unit.
2. Stamp Duty Land Tax at commercial rates: 0% up to £150,000, 2% on £150,001–£250,000, 5% above £250,000. On a £200,000 unit that is £1,000; on a £300,000 unit, £4,500.
3. Legal fees and searches: typically £3,000–£6,000 including the trustee's requirements.
4. Independent RICS valuation: typically £1,000–£2,000.
5. SIPP provider property purchase fee: often £500–£1,000.
6. A working cash buffer inside the SIPP (most providers require one) for insurance, fees and any void: allow £5,000–£10,000.

Rule of thumb: total cost ≈ purchase price plus 3–5%.

The 50% borrowing rule — the number that changes everything

A SIPP can borrow up to 50% of its net assets, secured against the property. The maths people miss: it is 50% of the pot, not 50% of the price. So the maximum purchase is roughly 1.5× the pot:

Pension pot (net assets)	Approx. max purchase incl. costs
£120,000	£180,000
£160,000	£240,000
£200,000	£300,000
£270,000	£405,000

Two practical caveats. First, lenders apply their own tests — the rent normally needs to cover interest comfortably, and rates on SIPP loans sit above residential mortgage rates. Second, borrowing amplifies outcomes in both directions: a void hurts more when the SIPP still owes a bank.

Three ways to close a shortfall

1. Consolidate. Most people over 45 have two or more forgotten workplace pensions. Combined into one full SIPP, pots that individually do nothing can fund a deposit-free purchase. (Transfers from schemes with guarantees, especially defined benefit, need regulated advice — required by law above £30,000.)
2. Contribute. Personal and company contributions — within the annual allowance, £60,000 for most people at the time of writing — can top up the pot in the tax years before a purchase, with tax relief on the way in. Company contributions are usually deductible for corporation tax.
3. Buy jointly. Two or more SIPPs can purchase together — business partners each owning 50%, or spouses combining pots. Each SIPP owns its share and receives its share of rent.

Worked example Illustrative example

A new-build industrial unit at Engine Works Park, Margate, priced at £359,999:

1. SDLT £7,500 + legals £4,500 + valuation £1,500 + SIPP fee £750 + buffer £7,500 = total requirement £381,749.
2. Without borrowing: pension pot of £381,749 needed.
3. With maximum borrowing: pot of roughly £254,500, borrowing £127,250.
4. Rent of £25,999 p.a. gives 6.8% gross on total cost — comfortably covering illustrative loan interest of £8,900 p.a. with £17,100 surplus building in the pension each year.

Current Engine Works availability and pricing: engineworkspark.com.

A sense-check before you fall in love with a unit

1. Ask your providers for current transfer values on every pension you hold — this week, not someday. Most people are surprised.
2. Apply the 1.5× rule to the combined figure.
3. If you are within ~£30,000 of a target unit, a year of planned contributions usually closes it.
4. Then speak to an independent financial adviser experienced in SIPP property before committing.

   Buying Commercial Property Through a SIPP: The Complete Guide →

FAQ

What is the minimum pension needed to buy commercial property?

There is no legal minimum, but as a working rule your combined pots need to be about two-thirds of the total purchase cost, using the SIPP's 50% borrowing allowance for the rest. For a £200,000 unit, that is roughly £135,000–£140,000.

How much can a SIPP borrow?

Up to 50% of the scheme's net assets, secured on the property. A £200,000 pot can borrow up to £100,000.

Can I combine old pensions to buy a property?

Yes — consolidating old workplace and personal pensions into one full SIPP is the most common way purchases are funded. Take advice before transferring anything with guarantees.