Commercial Property SIPP

Yorkieds

Yonk
Pleased Wolanski were helpful.

PAL
I think the investment in residential property is not restricted to 50% of the purchase price as 100% of the commercial property I operate from is within my SIPP.
The restriction will arise from the value of the fund and the value of the investment.

eg 1 - The SIPP could purchase the residential property you live in and you personally could either pay a commercial rent or live rent free this would create a tax charge (pension benefit in kind).

eg 2 - I am thinking of buying a holiday home off plan now and then sell it to my SIPP in April 2006, I expect an immediate CGT on the profit and then a tax charge when I use it, but the rental income will go into my SIPP tax free as would future growth in its capital.

I hasten to add none of these have yet being dicussed with my pension administrator (Wolanski)

TDS

Yorkieds

Apologies,

YDS, must check the spelling prior to posting!

Pal

I think the investment in residential property is not restricted to 50% of the purchase price as 100% of the commercial property I operate from is within my SIPP.
The restriction will arise from the value of the fund and the value of the investment.

Apologies if I wasn't clear.  The problem is the borrowing limit for residential property.  Most people do not have enough cash in their pension scheme to pay for the 50% of the property that they cannot borrow, or it will severely limit the number of properties that they can buy.  Most people will only be able to afford one.

yonk

Bear in mind, the rent has to be paid into the pension, so it will build up. And the other thing that can assist in buying larger "lumps" of property is that, at present, you can join together with other people to form a group. So a common way SIPPs have traditionally been used is by partners in a professional practice buying their office freehold.

So I'm contemplating using my other half's pension pot to boost my own pathetically meagre one. Don't worry, he has agreed and I will allow him an exit strategy!

mutley74

just heard that new star are offering a property unit trust tgat invests directly in commerical property. this fund can be held in an SIPP via hargeaves lansdown. I itend to start some monthly payments into this fund, good for my investment diversification.

dunstonh

Virtually all providers have a commercial property fund.

i have a percentage of commercial property in my own pension (and those i recommend) for many years now.

mutley74

DD, can you recommend any good consistent property funds?

dunstonh

DD, can you recommend any good consistent property funds?

To keep the other pension forum regulars happy, shouldnt you say consistently lucky  ;D

unlike other sectors, the differences over 10 years are not significant.

10 year performance (before charges)
Top open fund:  Standard Life 269.70%
Average: 224.69%
Lowest open fund: HOFS/lifetime 173.57%
lowest "big provider": Prudential 200.21%

5 year performance (before charges)
Top open fund: Scottish Widows 177.82%
Average: 156.12%
lowest open fund: HOFS/lifetime 141.40%
lowest "big provider": Prudential 148.63%

Scottish widows are only a few places down from top on the 10 yr and standard life are only a few percent behind on 5 year.  Easier to see who keeps coming bottom (consistently unlucky  :P )

The tables didnt include unit trust funds available within a pension.

mutley74

DD
cheers for the info. I was looking at maybe a property fund where i can make an investment of around £50/mth within my SIPP.HL recommend the NEw Star fund, and it looking at it skey features via New Star website, it directly invests and operates commercial property.

dunstonh

You would be looking at unit trust/OEIC property funds then.  There isnt a great quantity of these available.

New Star Property fund is the old Edinburgh Property fund that was rebranded when New Star took them over.

It was launched 2nd June 1999 so it hasnt got a long track record.  Since launch it has performed marginally better than the Norwich (Morley) Property fund which has the higher profile and was launched in 1991.  However, they take it in turns and its currently New Stars turn.

You can only really toss a coin between these two.

If you feel its a appropriate, NU has had the same fund manager since 2001 whereas New Star has two managers who were appointed 9 months ago.  In October, new star is bringing the management of the property fund in house so its another change. NU won the property fund of the year award in April 2004.

NU have no fixed interest investments in their fund but New star do.  NU is heavier in property shares than New Star.  NU has a 1.25% AMC New Star 1.5%.  That assumes direct investment.