There are few occasions when an individual may legally buy a property in their name and have their company pay for it. Thanks to changes to pension legislation last year, this is now a tax efficient possibility for the self-employed and some company directors.

Pension mortgages are back in vogue as a tax-planning measure. The product particularly suits the self-employed and company directors (those with more than 5 per cent shareholding) looking for a commercial property investment.

Under the new rules, these categories of personal pension fundholders no longer have to buy an annuity at retirement which then provides an annual income.

Up to 25 per cent of their retirement fund may be taken in cash, tax-free. The remainder is placed in an Approved Minimum Retirement Fund (AMRF) or an Approved Retirement Fund (ARF), depending on the individual's income level.

A pension mortgage works on the same basis as an endowment mortgage - you pay back only interest on the borrowings every year rather than paying a combination of capital and interest over the term of the loan.

At the same time, the borrower takes out a pension plan and their regular contributions receive tax relief and grow tax free until retirement. The company receives full corporation tax relief on the pension contributions.

When the person retires between age 50 and 70, he or she uses part of the fund to pay off the mortgage.

Benefits include:

tax relief on mortgage interest and pension premiums;

tax free pension fund growth;

individual owns property (but the company pays);

company could benefit from reduced rent through lease agreement with owner;

directors could retire early and pay off mortgage;

any surplus funds belong to an individual;

Pitfalls include: variable lenders' criteria;

level term insurance options;

choosing a suitable product.