Government to call time on pubs for pensions

The Government is soon to restrict the amount of money private individuals can raise for commercial investment against their pension stopping a viable way of buying a pub before retirement.

Currently, those seeking to buy into a pub business or take over an existing commercial property can raise three times the value of their pension via a Self Investment Pension (SIP). This is going to be reduced to 50 per cent of the fund on April 5, 2005.

SIP specialist Alan Bristow of Crompton Partners, which offers a tailored advisory service to prospective licensees wishing to raise private equity against their pensions, has said few people realise the law is soon to change.

"At the moment someone with a £100,000 pension can raise an extra £300,000, which they can then use to invest in a pub," Bristow said. "This suits people who wish for a change in lifestyle but who are not ready to retire just yet and are considering running a pub for a few years."

With pub property prices predicted to remain relatively stable despite a broader property slump, Bristow described the SIPs route of raising capital as an excellent way of investing in a working business without having to take on a huge burden of extra debt.

The fact remains that raising capital against a pension fund will always incur a serious risk if the business fails, but up to 60,000 SIPs are in existence in the UK and for many these represent a good return-to-investment ratio.