There has been an increasing trend among Sipp clients to buy land with their pension funds, a Sipp firm has reported.

Xafinity analysed the properties bought by its clients since the start of last year and found that 12% of these were farmland or land with planning permission.

The average cost of the land purchased has been around £100,000 with deals done as low as £20k and up to £250k, depending on the size and the location of the land.

Retail properties on the high street has remained the strongest sector for property purchase, the company stated. Retail property purchases accounted for 32% of the Xafinity Sipp property purchases with an average purchase price of £176k.

Industrial units remained a core Sipp property investment with 29% of all purchases in this category at an average price of £217k, which reflects the average value of a Sipp property purchase on the data reviewed.

Jeff Steedman, head of business development at Xafinity, said the trend towards land buys may be driven by a growing understanding of the tax advantages of owning development land within a tax-free pensions wrapper, especially where demand for housing and commercial developments has grown.

He said: “At Xafinity, we continue to find that Sipp property and land purchases are very popular indeed both with SME companies and with those running small retail businesses.

“Development of land with planning permission using pension fund money is now very popular with advised clients. The butcher, grocer, dentist or optician all need premises to trade from, and when they get the opportunity to buy their shop they often turn to their pension fund to finance the deal.

“However, with a recently reported figure of just 3% of commercial property purchases in the UK being financed from pension fund money, advisers and accountants have a key role in educating clients on the opportunities.”