Could property in your SIPP create a liquidity problem for your family?

Aug 1
4 min read

Property can be a valuable long-term pension asset. But forthcoming inheritance tax changes mean that access to cash could become just as important as the value of the asset itself.

Suggested read time: 4 minutes

A self-invested personal pension (SIPP) can offer greater investment choice than many standard pensions. For some business owners and investors, that choice includes commercial property. It may be premises used by their company, an office, a shop or another qualifying property investment.

Holding property in a SIPP can form part of a carefully considered retirement strategy. However, property is not the same as cash: selling it can take time, valuations can change and a rushed transaction may not achieve the outcome the family or trustees would have preferred.

Why the rules from April 2027 matter

From 6 April 2027, most unused pension funds and pension death benefits are due to be included in a deceased person’s estate for inheritance tax purposes. The changes apply to deaths on or after that date. Whether inheritance tax is actually payable will depend on the value and composition of the whole estate, the available allowances and exemptions, and the individual circumstances involved.

Under the new process, personal representatives will be responsible for reporting and paying any inheritance tax due on pension benefits. Where they reasonably expect tax to be due, they will be able to ask a pension scheme administrator to withhold part of the taxable benefits and, in certain circumstances, pay the pension-related inheritance tax directly to HM Revenue & Customs.

The key planning question: if a significant part of the SIPP is tied up in property, where will the cash come from when it is needed?

The issue is liquidity, not simply tax

Inheritance tax discussions often focus on rates and allowances. With property-backed SIPPs, timing can be equally important. A property may be valuable on paper but difficult to turn into cash quickly. The estate, beneficiaries, pension trustees and professional advisers may all need to exchange information before the liability can be calculated and settled.

If there is too little cash elsewhere in the SIPP or estate, the available choices may narrow. Depending on the scheme rules and circumstances, the people involved might need to consider retaining funds, arranging another source of finance or selling the property. A sale under time pressure can introduce extra cost, delay and uncertainty. It may also be especially disruptive where the property is occupied by a family business.

The legislation includes mechanisms intended to ease administration, including the ability for personal representatives to direct schemes to withhold up to 50% of taxable pension benefits for up to 15 months in qualifying cases. Even so, withholding creates breathing space; it does not turn an illiquid building into readily available cash.

Questions worth asking now

· How much of the SIPP is held in property or other assets that may take time to sell?

· Is there enough cash or other readily realisable investment within the SIPP to meet costs and a possible tax liability?

· How would the wider estate fund inheritance tax while pension valuations and information are being gathered?

· Could a property sale affect an operating business, tenants or family members?

· Are nomination forms, wills and records of all pension arrangements up to date?

· Have the financial adviser, accountant and solicitor considered the plan together?

Planning ahead can protect flexibility

The aim is not necessarily to sell property or make a rushed change to a pension. It is to understand how the strategy might work in practice if the member dies, and to identify a potential cash shortfall before the family is dealing with bereavement and deadlines.

A review may consider the balance between property and liquid assets, the SIPP’s rules, the wider estate, likely beneficiaries and the possible tax position. Because pensions, inheritance tax and estate administration overlap, coordinated advice can be particularly valuable.

If you hold commercial property in a SIPP—or expect to inherit pension benefits—it may be sensible to review the arrangements before the new rules take effect. Folan Brookes can help you understand your pension in the context of your wider financial plan and work alongside your other professional advisers.

Speak to us: Contact the Folan Brookes team to arrange a review of your pension and estate-planning arrangements.

The value of investments and any income from them can fall as well as rise and you may not get back the amount you invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

For specialist tax advice, please refer to an accountant or tax specialist.

Approved by The Openwork Partnership on 28/07/2026

Folan Brookes Financial Consultants Limited is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.