- Couple with several pension plans looking to maximise returns
- Wealthy Business Owner looking to release cash from his pension fund but maximise investment returns
- 3 Friends investing together
- Family with equity in their home
- Older family with equity in their home and other property
- Group of friends with limited cash
- Young male in rented accommodation with good income
Case Studies
Couple with several pension plans looking to maximise returns
David (48) and Jane (47) both are employed and have 2 pension policies each that they no longer contribute towards. They have built up these funds over the years whilst in previous employments. They have reviewed their funds and felt that the level of income that the funds may give them at retirement wasn’t what they had hoped for.
They decided to pool together their pension funds into a Self Invested Personal Pension Plan (SIPP) and purchase a 1 bedroom apartment at The Marquis Estate in St Lucia. Their total fund transferred to the SIPP was approximately £100,000. £45,000 was invested into the property whilst they were free to invest the balance where they felt fit.
Over the next 3 years until completion of the resort, David and Jane intend to invest the balance of the fund elsewhere in stocks/shares/managed funds of their own choice or other alternative asset classes which the SIPP will allow them to. They have included the property in St Lucia in their overall retirement plan and have taken back control of the investment of their pension funds.
David and Jane may make further contributions which will benefit from tax relief at the prevailing rate.
On completion of the resort, David and Jane will receive £15,000 per annum guaranteed gross rental return for the first 2 years, followed by 50/50 net room rate share, free of tax back into their SIPP. At any time, David & Jane can elect to sell the property and ensure profit will also go back into his pension fund free of Capital Gains Tax.
Wealthy Business Owner looking to release cash from his pension fund but maximise investment returns
Business owner Bryan (59) has over the years contributed to a personal pension. Around 3 years ago he consolidated 3 pensions to bring them together with one company. Since then he has not actively managed the funds nor has his adviser. He has become increasingly disillusioned with poor investment growth and his circumstances mean he would like to release the allowable 25% tax free cash which he is eligible for based on his current age.
He decided to invest in a luxury 2 bedroom apartment in the Merricks Beach Resort in Barbados via a SIPP. Bryan spoke with an Independent Financial Adviser and arranged for the required paperwork to allow the release of the tax free cash of 25% of his fund. Once a SIPP was set up for Bryan the SIPP trustees organise the immediate payment of the 30% deposit.
He used his 25% tax free cash to pay off the balance of his mortgage which in turn has saved his interest payments in the long run.
On completion of his purchase, Bryan will receive £21,000 per annum guaranteed gross rental return back into his SIPP free of tax.
Whilst he has only used a proportion of his overall fund to purchase the property he can look to use the balance to invest elsewhere in stocks and shares and possibly investment bonds with built in guarantees. Bryan may consider investing in further properties with ROC using his SIPP.
At any time, Bryan can elect to sell the property and ensure profit will also go back into his pension fund free of Capital Gains Tax.
Bryan has purchased a Caribbean property within a world class resort using existing funds he already had, taken back control of his fund to make his own investment decisions and used the purchase of a luxury hotel resort property to form a proportion of his overall financial and retirement planning.
Ryan (29), Andrew (31) and James (32) have decided to pool resources and personally invest £10,000 each to fund the deposit on a studio suite at Las Canas Beach Resort in Dominican Republic.
Since they invested that have already seen a sharp increase in value of their property of over 40%. When the resort opens in 2012 the property will provide a guaranteed rental income of 10% per annum which equates to £10,500 per annum which will cover the mortgage and maintenance costs. From year 3 onwards the property is extended to provide double digit rental returns which will give a substantial yield on their small outlay.
The three guys will have to divide the 30 days free usage for the property accordingly. Family with equity in their home
Ian and Vicky, both 35 own their property with a mortgage. Over the last 5 years the value of their home has increased in value giving them equity. Their home is the only asset they have as they have little in terms of savings. The couple viewed the equity in their home as “dead money”.
They decided to release equity in their home and take advantage of the 100% finance scheme available and have invested in a hotel suite in Barbados at well below market value and have already seen the value of the property raise by £100k since purchase.
Their monthly household budget is unaffected as the developer pays the monthly costs of the loan which is then added to the outstanding balance on the property at completion.
As the resort develops the capital value of their property is also likely to increase even further and Ian and Vicky can then elect to take a 70% Loan to Value mortgage (based on the increased property value) and the surplus cash generated used to repay the previous deposit loan.
As well as producing a high rental income the family can also enjoy 30 days usage in Barbados at this 5 star resort every year free of charge.
Ray (50) and Jane (42) have released equity from their home. They see the equity in their home as “dead” money and their current mortgage rate and the rate offered by their lender is very low at just above the based rate. They have recently received the delivery of a property they purchased in Eastern Europe which has grown substantially in value which they originally funded by releasing equity from their home.
They have taken advantage of the 100% finance scheme available and have invested in a 1 bedroom apartment in St Lucia at well below market value and have already seen the value of the property raise by £45k since purchase.
Their household budget is unaffected as the developer pays the monthly costs of the loan which is then added to the outstanding balance on the property at completion. They hope to sell their property in Eastern Europe to later on crystalize the gains made from this investment 3 years ago and use the proceeds to pay off the balance on their property in St Lucia leaving them with income being earned in St Lucia of £13,500 per annum guaranteed for the first 2 years followed by 50/50 net room rate share which has the potential to provide double digit rental yields.
They also plan to use the balance of the proceeds from the sale of their property in Eastern Europe to reinvest with ROC.
Their family will also enjoy 30 days usage in St Lucia at this 5 star resort every year saving them money on holiday accommodation each year.
Chris (21), Mike (25), Ryan (27) and Dave (29) have decided to pool resources and personally invest £10,000 each to fund the deposit on a 1 bedroom Apartment at Las Canas Beach Resort in Dominican Republic.
They have taken advantage of the 100% finance scheme available and each arranged loans for their deposit. Their day to day expenditure is unaffected as the developer maintains their loan payments each month meaning that the only cash each of them has had to lay down is £250 to fund the reservation fee for the property.
They have already seen a sharp increase in value of their property of over 40% and when the resort opens in 2012, the guaranteed 10% gross rental returns will more than cover the costs of a mortgage taken out on completion and anticipated double digit rental returns from year 3 onwards will give substantial yield on their small outlay.
They will have to divide the 30 days free usage for the property accordingly but as they have seen this finance arrangement work first hand they are now planning a further investment together.
Young male in rented accommodation with good income
Jonathan (27) is employed with an income of £30,000 per annum and lives in a rented apartment with his girlfriend. He currently has very little retirement provision or savings and is looking for a way to get on the property ladder but has no deposit to purchase in the UK. He is happy to continue renting and is looking at current opportunities.
He decided to invest in a garden apartment at Garapua Beach Resort in Brazil by using the 100% finance scheme available. The only cash he has had to lay down is £1,000 reservation fee. He has purchased the property well below market value.
Jonathan’s expenditure is unaffected as the developer maintains his loan payment each month meaning his outgoings are unaffected, however he has made the move to invest for his future.
He has already seen growth in the value of his property of around 20% and when the resort opens, the guaranteed 10% gross rental returns will more than cover the costs of a mortgage taken out on completion and anticipated double digit rental returns from year 3 onwards will give substantial yield on his minimal outlay.
Jonathan will also be able to use the property for 30 days free of charge if he wishes once the property is complete.
All of the above are actual client situations however their names have been changed for the purpose of our case studies to protect client confidentiality. These case studies do not form a basis for financial advice nor be deemed as financial advice.
Advice on a SIPP must be sought from a pension specialist working for a firm authorised and regulated by the Financial Services Authority (FSA). An advisers’ registration can be checked by visiting www.fsa.gov.uk.
ROC investments does not offer financial advice
ROC investments is not regulated by the Financial Services Authority
ROC investments do not provide any advice on SIPPs direct. We will introduce all interested clients to an authorised FSA firm for this purpose.
