Commercial Property SIPP

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
21 replies 3.4K views
yonkyonk Forumite
761 Posts
I am comtemplating a SIPP with the specific aim of using the funds I have already accrued in a pension plan to buy a small commercial property.

I have been looking at various firms and the literature by Pointon York is fairly clear. However, I did come across an article about how they had been fined for lots of different lapses in their dealings back in 1998.

Does anyone know if they have sorted themselves out to the point you would trust them to admininster a pension? Mod: Is it ok to ask this?

I have just had an interesting meander through the rest of this board and have enjoyed all the debate on SIPPs. I take on board the reservations expressed but I do have some expertise regarding property and this is a way to utilise it. However, if someone has had a really good or bad experience and can offer some advice, I would be most grateful.
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Replies

  • PalPal Forumite
    2.1K Posts
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    I can answer at least one of your questions...
    Mod: Is it ok to ask this?

    Yes, it is. ;)

    I have no idea about the answers to the rest of your questions though.

    Given that you are buying a commercial property I assume that you are taking advice, in particular tax advice. If your adviser confirms that a SIPP is the most tax efficient way to go about the purchase, then it makes perfect sense to do so. This would be a specialist situation that warrants the use of a SIPP.

    I only object to the way SIPPS are marketed to suggest that they are a good vehicle for ordinary joe punter to outwit or outperform the big bad professional investment managers of the world, as all it is really doing is advocating gambling in order to earn commissions and trading fees for the SIPP provider.
  • yonkyonk Forumite
    761 Posts
    Thanks.

    Comments appreciated.
  • Hi Yonk,

    I currently hold a commercial property within my SIPP.
    It is in fact the property from which I run my business.
    Current return on the investment is around 9%.
    My SIPP is administered by Wolanski & Co.

    The investment in the property was originally from a company SSAS which was converted to personal SIPPS in 2001.

    You may wish to take note that from April 2006 (New Pension Rules) you will also be able to invest in residential property.

    Hope this helps.

    YDS
  • yonkyonk Forumite
    761 Posts
    Thanks!

    It was actually the new rules that got me thinking about this as the amount you can gear up will reduce to 50% and so to get a reasonable size property I need to do this before that happens.

    I may well look at mixed use investments once the rules change.

    Glad to hear it's working out for you. :)
  • PalPal Forumite
    2.1K Posts
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    Can you borrow to buy commercial property within a SIPP then? What is the borrowing limit?
  • The current pension rules allow for this, the new investment rules will allow you to invest in a much wider range of assets and I believe it is left to the trustees and the scheme administrators to decide on the suitabilitiy. The new rules restrict borrowing to 50% of the net value of the fund.
    We originally purchased the first property within the scheme utilising a business mortgage.
    Once owned within the pension scheme the leaseholder must pay a commercial rent-very tax efficient.
    YDS
  • yonkyonk Forumite
    761 Posts
    YDS: I contacted Wolanski and they were very helpful, cheers! They told me several questions to ask other providers "as I go round the marketplace."

    PAL: If you look at the Newsletter on the Wolanski website, it has info on how the rules may change in 2006. Until then, you can borrow up to 75% of the value of a property with the deposit made up of funds you already hold in a pension plan. The SIPP Trustees "own" the property and manage it and all rents are paid into the SIPP. They also decide if it a suitable property.

    Also James Hay, Suffolk Life, Pointon York, the Inland Revenue site and HM Treasury have lots of info...
  • PalPal Forumite
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    Interesting stuff.

    Who are the SIPP trustees then? And how do they decide what is an appropriate commercial property investment? What if they disagree with you?

    Personally I think the changes to allow residential property within a portfolio are a bit of a damp squib because of the 50% borrowing limit. Residential property investment relies on significant gearing, otherwise most people would never be able to afford more than one property. With house prices at the level they are, the fund is unlikely to get significant yields on its investment, even with the tax advantages.
  • yonkyonk Forumite
    761 Posts
    I think they are in the driving seat when it comes to the decision about the property.

    You may well be right about the residential component being difficult for small investors without significant gearing. Mind you, I went to an "investment" seminar five years ago hosted by a very large letting agent. The guest speakers were a couple of guys from ING who had a very active interest in the UK residential market. So it might well be the big boys who take this forward, particularly with property funds being so popular just now. However, the Government is fairly convinced that residential won't be too popular. But they are also abolishing the strict % contributions in favour of much larger annual contribution limits.
  • PalPal Forumite
    2.1K Posts
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    Unfortunately it still relies on people being able to find the money to contribute in the first place, and being able to find 50% of a property price up front is going to be almost impossible for most people.

    It will be interesting to see what the professionals come up with, but again I doubt they would be that interested due to the risks involved and the massive amounts of cash required.

    Looks like property funds will remain the only option for most people.
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