By investing in commercial property, pension schemes and their sponsoring employers might be able to benefit from the downturn.

Given the decline in bank interest rates brought about by the economic downturn, many trustees have been looking for new investment vehicles in which to place large cash deposits.

As we all know, the recession has also led to a decline in commercial property valuations, but you might not know that this brings about a unique opportunity for pension scheme trustees and finance directors.

In certain cases, a pension scheme's trustees could use the scheme's assets to fund the purchase of the property of the sponsoring employer. This then releases the liquidity within the pension scheme to the company – at a time when such liquidity within the company would be highly desirable.

The pension scheme receives rental income, any capital growth and, in the longer term, any sale proceeds free of inheritance tax, CGT and income tax. The company would also benefit from a corporation tax offset on the rental income it pays to the trustees.

As 2011 approaches and capital allowances on agricultural and industrial commercial property look set to be phased out, this may be an opportune moment for trustees to review their cash balances and look at moving funds into commercial property.

Certain schemes are also able to make capital loans to the sponsoring employer of up to 50% of the asset value of the scheme. The interest rate of these loans is an attractive 1% above base rate. However, the business must use these funds for genuine business purposes (not simply to aid cashflow).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.