Comercial Property Sipp providers

Weave

Hi

I am looking to establish a SIPP to purchase a commercial property for my business to use. The property will be a joint purchase for myself and my business partner to hold within the SIPP/SIPP’s and we are in a position to fund this and need to do so before the end of the tax year.

I am currently talking to an IFA but wonder if I can establish the SIPP without using an IFA as they will obviously charge for their involvement.

My questions are -
1) Is there a list of commercial property SIPP providers I can deal direct with?
2) Would you recommend this approach or is it a total minefield?

I am aware of the issues with two people owning a property in a SIPP and the possible problems of one party needing to cash in before the other e.t.c. At the moment I am primarily concentrating on the issue of whether the IFA route is the only way or maybe the best way to go?

Thanks for your input.

Meeper

Yes, an IFA will charge for their involvement. But for that they will answer questions like these (and many more) and you get the knowledge that they have to give you the facts backed up by consumer protection legislation. This type of transaction is not straightforward by any means, and whilst some issues in financial services can be done on a DIY basis (not many if you want to do it well), this isn't one of them.

Speak to an IFA, preferably one with G60 (old) or AF3 (current) qualifications as a pensions specialist.

CannySaver_2

Hi

In answer to your question there are SIPP providers who will take commercial property investments and also deal directly with the public rather than through an IFA.

Take a look at this website, it shows you which providers deal in commercial property and also which will take applications directly:

http://www.!!!!!!.uk/sipp-zone/sipps/

http://www.!!!!!!.uk/sipp-zone/help-choosing-your-sipp/commercial-property/

That doesn't mean it is a good idea though!

If you have done it before and know what you are doing then you probably could sort it yourself. If this is your first purchase then a grand or so in IFA fees will probably save you time and money in the long run. I'd echo the thoughts that the IFA should have the right qualifications, they also need to be active in this area, you don't want to be the only person the IFA does a property purchase for that year!

The Canny Saver

brianrhill

Weave wrote: »

Hi

I am looking to establish a SIPP to purchase a commercial property for my business to use. The property will be a joint purchase for myself and my business partner to hold within the SIPP/SIPP’s and we are in a position to fund this and need to do so before the end of the tax year.

I am currently talking to an IFA but wonder if I can establish the SIPP without using an IFA as they will obviously charge for their involvement.

My questions are -
1) Is there a list of commercial property SIPP providers I can deal direct with?
2) Would you recommend this approach or is it a total minefield?

I am aware of the issues with two people owning a property in a SIPP and the possible problems of one party needing to cash in before the other e.t.c. At the moment I am primarily concentrating on the issue of whether the IFA route is the only way or maybe the best way to go?

Thanks for your input.

If you have not considered using a SSAS as well as a SIPP, I'd suggest you have an adviser with limited experience. Equally, you may see firms promoting SIPPs and not promoting SSAS, you are not going to see the full picture. SSAS's can often cost much less than a SIPP for these sorts of investments, it's just that SIPPs have been marketed well!

http://www.ssaspractitioner.com/ThebenefitsofaSSAS/WhyaSSAS/tabid/4066/Default.aspx for some useful info

property.advert

My own investigations into commercial property and SIPPs and also unlisted companies came across fees just plucked out of the air, such as £2000 for a valuation etc. with no tangibility to the actual underlying investment or its lack of complexity.

There must be something decent out there but at first glance, it seems as though the further you get from the mainstream, the more there are people waiting to advise you out of your money.

CannySaver_2

property.advert wrote: »

My own investigations into commercial property and SIPPs and also unlisted companies came across fees just plucked out of the air, such as £2000 for a valuation etc. with no tangibility to the actual underlying investment or its lack of complexity.

There must be something decent out there but at first glance, it seems as though the further you get from the mainstream, the more there are people waiting to advise you out of your money.

Hi

I'd split this down into fees for advice and actual SIPP fees.

SIPP fees tend to be either a percentage, a fixed fee or an hourly rate. On the whole for something such as a property purchase I would avoid percentage based fees and as a rule prefer fixed fees than open ended hourly rates. If you look at someone such as IPM you can pretty easily see the fees one will pay for arranging a property purchase in a SIPP:

http://www.!!!!!!.uk/sipp-zone/sipps/ipm/

The fees charged in this example seem prety reasonable to me, of course there are other SIPP providers, I simply give IPM as an example of clear fees and also beacuse they don't charge an additional annual property management fee.

When it comes to advice fees, I would agree that there are a percentage of IFAs out there who frankly make a living out of giving poor advice, however there are a large number of IFAs (the majority I would suspect) who give excellent advice to very happy clients. Of course they have to charge for their services and I would suggest a standard property purchase in a SIPP would come in between £1k and £1.5k.

If you want to buy a property in a SIPP and to avoid the poor IFAs I would suggest following these rules:

1. Use friends and family to find an IFA, if you are buying a property your accountant might know a decent IFA. You can always go back to the old favorite www.unbiased.co.uk

2. Use an IFA who is experienced and qualified in this area, experience is as important as qualifications. Ask them for examples of property purchases they have done in the past. Perhaps even ask to see written testimonials

3. Get them to set out their charges and the work they will do for you clearly in a written fee agreement

4. Don't be afraid to visit a few IFAs (time permitting) before you make the decision who you will use

5. Finally, always check they are actually registered with the FSA

I hope this helps those people wanting to buy property in their SIPP

The Canny Saver

brianrhill

CannySaver wrote: »

Hi

I'd split this down into fees for advice and actual SIPP fees.

SIPP fees tend to be either a percentage, a fixed fee or an hourly rate. On the whole for something such as a property purchase I would avoid percentage based fees and as a rule prefer fixed fees than open ended hourly rates. If you look at someone such as IPM you can pretty easily see the fees one will pay for arranging a property purchase in a SIPP:

http://www.!!!!!!.uk/sipp-zone/sipps/ipm/

The fees charged in this example seem prety reasonable to me, of course there are other SIPP providers, I simply give IPM as an example of clear fees and also beacuse they don't charge an additional annual property management fee.

When it comes to advice fees, I would agree that there are a percentage of IFAs out there who frankly make a living out of giving poor advice, however there are a large number of IFAs (the majority I would suspect) who give excellent advice to very happy clients. Of course they have to charge for their services and I would suggest a standard property purchase in a SIPP would come in between £1k and £1.5k.

If you want to buy a property in a SIPP and to avoid the poor IFAs I would suggest following these rules:

1. Use friends and family to find an IFA, if you are buying a property your accountant might know a decent IFA. You can always go back to the old favorite www.unbiased.co.uk

2. Use an IFA who is experienced and qualified in this area, experience is as important as qualifications. Ask them for examples of property purchases they have done in the past. Perhaps even ask to see written testimonials

3. Get them to set out their charges and the work they will do for you clearly in a written fee agreement

4. Don't be afraid to visit a few IFAs (time permitting) before you make the decision who you will use

5. Finally, always check they are actually registered with the FSA

I hope this helps those people wanting to buy property in their SIPP

The Canny Saver

Good post by CannySaver, except I would put #5 as the first thing to do, although the FSA register does not differentiate between IFA and FA.

AccountExec

James Hay currently offer the Partnership product which allows you to have most of the control (co-trusteeship) over your investments, in this case property. No financial adviser is required but it is advised !!

Such fees as valuations or solicitors fees can be determined by the individual as they have free reign to use whatever company they desire providing they are FSA regulated.(RICS if property surveyor).

The charges for establishing the SIPP are, in my opinion, relatively cheap and if you get in by the end of the year they will rebate some of the fees.

If your uncertain about anything, go see an adviser (respected practice, FSA regulated) or speak to a BDM of the relative company. Even though BDMS are more associated to bringing in business through IFAs, in my experience they will be more than happy to come see you and discuss products that cater for your needs.

Non of the above is to be taken as financial advise

thenudeone

This post of mine is about holding unlisted shares in a SIPP but the same providers are likely to be in both markets:
http://forums.moneysavingexpert.com/showpost.php?p=38801194&postcount=20

Weave

Thanks for all of your input so far. I will have a look around some of the web links provided.

We spoke to the IFA about charges today and disappointingly they work on a percentage of the money transferred in. They want 3% of the initial fund we create and then 0.75% per year thereafter of the funds value. This will be between £6k and £9k in IFA commission then a further £2k to £3k per year. On top of this the SIPP provider will make additional charges.

I understand IFA’s charge for their advice but when buying a property the investment advice does not exist as we will choose the property and deal with the purchase, they simply need to ensure the SIPP mechanics part of it work. The IFA explained they have to cover their overheads and Professional Indemnity insurance but the fee seems excessive for a property SIPP.

Would you agree?

brianrhill

Weave wrote: »

Thanks for all of your input so far. I will have a look around some of the web links provided.

We spoke to the IFA about charges today and disappointingly they work on a percentage of the money transferred in. They want 3% of the initial fund we create and then 0.75% per year thereafter of the funds value. This will be between £6k and £9k in IFA commission then a further £2k to £3k per year. On top of this the SIPP provider will make additional charges.

I understand IFA’s charge for their advice but when buying a property the investment advice does not exist as we will choose the property and deal with the purchase, they simply need to ensure the SIPP mechanics part of it work. The IFA explained they have to cover their overheads and Professional Indemnity insurance but the fee seems excessive for a property SIPP.

Would you agree?

Yes.

For a single investment like this, and without knowing any further details, around 0.50% - 1% would probably be sufficient, depending on the existing schemes that you're transferring into the SIPP - if you have 10 schemes you're consolidating then it's going to cost more than just 1 or 2 schemes.

As an example, although not many adviser work this way I think, our costings work on 0.50% - 1.00% for the advice and then a fixed fee for the implementation (which is mostly admin and paraplanning) based on the number of providers and who the providers are. For instance, dealing with AonHewitt or Mercers takes 3x as long as dealing with anyone else! Ongoing reviews are charged at a set fee which a % of the fund can be used to pay towards. For instance, an annual review costing £500 would mean trail fee from a SIPP valued at £300k, equates to 0.17%. but that's only if the client wants it of course.

If there are any occupational shemes you are transferring then this also cause costings to go up.

If you do not want ongoing advice then you shouldn't have to pay for it. You should then expect to pay for any subsequent advice or assistance. This comes down to the unbundling approach to fees/commission that the IFA seems to have missed.

It sounds like you'll be paying his total indemnity bill for the year! You should see if you can get your IFA to separate out his costings for advice, implementation and ongoing servicing, and choose what you want to do!