SIPP Commercial Property Rental Investment & External Pension Dealing Accounts

housedesign1

For those of you who own property in your SIPP, please advise what method you use to invest the rental income from a commercial property held in your SIPP.

As with several commercial property SIPP providers, our provider does not have the facility for an investment platform and so I am investigating best platforms for a monthly transfer out of the rental income.  Any recommendations for low cost user friendly platforms for this?  Having spoken with XPS and Dentons, both recognise AJBell well and so I am assuming they are the go-to here.  I have my main SIPP with HL who do not offer the ability to invest SIPP funds 'which do not count towards annual contribution allowance' (as property rent does not).

What I am looking for is the most cost effective (and efficient) external pension dealing account provider.  Perhaps that is AJBell?  But grateful for any recommendations!

DRS1

This surely can't be new territory for the commercial property SIPP provider.  What do they usually do with the rental income?

QrizB

DRS1 said:

This surely can't be new territory for the commercial property SIPP provider.  What do they usually do with the rental income?

That was going to be my question!

housedesign1 said:

I have my main SIPP with HL who do not offer the ability to invest SIPP funds 'which do not count towards annual contribution allowance' (as property rent does not).

When the rent is paid, is it inside your property SIPP or outside it?

If it's inside, it's already part of your pension and the "which do not count towards annual contribution allowance" doesn't really matter, as far as I can see. If it's outside the SIPP, do you have an equivalent amount of earned income that would be eligible for tax relief?

housedesign1

DRS1 said:

This surely can't be new territory for the commercial property SIPP provider.  What do they usually do with the rental income?

Leave it in an XPS cash account by default.  When nudged, they suggest speaking with an FA.

poseidon1

housedesign1 said:

For those of you who own property in your SIPP, please advise what method you use to invest the rental income from a commercial property held in your SIPP.

As with several commercial property SIPP providers, our provider does not have the facility for an investment platform and so I am investigating best platforms for a monthly transfer out of the rental income.  Any recommendations for low cost user friendly platforms for this?  Having spoken with XPS and Dentons, both recognise AJBell well and so I am assuming they are the go-to here.  I have my main SIPP with HL who do not offer the ability to invest SIPP funds 'which do not count towards annual contribution allowance' (as property rent does not).

What I am looking for is the most cost effective (and efficient) external pension dealing account provider.  Perhaps that is AJBell?  But grateful for any recommendations!

I see you have already mentioned Dentons as part of your investigations so are aware that if you move to them they can interface with an appropriate investment platform to reinvest the sipp rental income and retain the sipp umbrella over both aspects of your retirement pots. As you say AJ Bell seems to be favoured in this regard.

However, has your sipp provider reached out to you with their opinions as to how your illiquid commercial property sipp can prepare for the proposed new 2027 regime for IHT on sipp pots?

I see no reason why commercial property sipps will be exempted from the new regime, so it may be that going forward a significant proportion of your rental stream may need to be retained in cash, against the putative iht exposure unless some form of loan facility  ( to pay the tax) can be negotiated to be put in place  when needed. 

This is not an issue that will be of any concern to the vast majority of forum members, but do wonder whether this has yet to feature in the forward planning for your sipp.

DRS1

I found this in XPS' booklet on Commercial Property in SIPPs.  It does imply you can hold these other investments in their SIPP

"From the money held in each member’s individual SIPP bank account, the members can invest their funds as they 

see fit in other approvable investments such as quoted shares, unit trusts and trustee investment plans, to 

mention just a few"

DRS1

I am assuming the XPS cash account is within the XPS SIPP.
If they are not set up to do investments for the rental income in the XPS SIPP it looks like you will need to do a transfer between SIPPS.  Those are normally one off affairs.  Hopefully someone will be along to say if you can do regular partial transfers.  HL ought to accept transfers in without worrying about them being contributions - maybe if you ask them about regular partial transfers from another SIPP you might get a more helpful answer?  Also ask XPS if they will do the transfers out.
Presumably you need to keep some cash balance in the XPS SIPP to cover any expenses relating to the property?

Albermarle

poseidon1 said:

housedesign1 said:j

For those of you who own property in your SIPP, please advise what method you use to invest the rental income from a commercial property held in your SIPP.

As with several commercial property SIPP providers, our provider does not have the facility for an investment platform and so I am investigating best platforms for a monthly transfer out of the rental income.  Any recommendations for low cost user friendly platforms for this?  Having spoken with XPS and Dentons, both recognise AJBell well and so I am assuming they are the go-to here.  I have my main SIPP with HL who do not offer the ability to invest SIPP funds 'which do not count towards annual contribution allowance' (as property rent does not).

What I am looking for is the most cost effective (and efficient) external pension dealing account provider.  Perhaps that is AJBell?  But grateful for any recommendations!

I see you have already mentioned Dentons as part of your investigations so are aware that if you move to them they can interface with an appropriate investment platform to reinvest the sipp rental income and retain the sipp umbrella over both aspects of your retirement pots. As you say AJ Bell seems to be favoured in this regard.

However, has your sipp provider reached out to you with their opinions as to how your illiquid commercial property sipp can prepare for the proposed new 2027 regime for IHT on sipp pots?

I see no reason why commercial property sipps will be exempted from the new regime, so it may be that going forward a significant proportion of your rental stream may need to be retained in cash, against the putative iht exposure unless some form of loan facility  ( to pay the tax) can be negotiated to be put in place  when needed. 

This is not an issue that will be of any concern to the vast majority of forum members, but do wonder whether this has yet to feature in the forward planning for your sipp.

It is a good point for the OP to think about, but I could guess that the SIPP provider will be reluctant to make comment, as the details of the legislation are still being drafted and consulted about.

poseidon1

Albermarle said:

poseidon1 said:

housedesign1 said:j

For those of you who own property in your SIPP, please advise what method you use to invest the rental income from a commercial property held in your SIPP.

As with several commercial property SIPP providers, our provider does not have the facility for an investment platform and so I am investigating best platforms for a monthly transfer out of the rental income.  Any recommendations for low cost user friendly platforms for this?  Having spoken with XPS and Dentons, both recognise AJBell well and so I am assuming they are the go-to here.  I have my main SIPP with HL who do not offer the ability to invest SIPP funds 'which do not count towards annual contribution allowance' (as property rent does not).

What I am looking for is the most cost effective (and efficient) external pension dealing account provider.  Perhaps that is AJBell?  But grateful for any recommendations!

I see you have already mentioned Dentons as part of your investigations so are aware that if you move to them they can interface with an appropriate investment platform to reinvest the sipp rental income and retain the sipp umbrella over both aspects of your retirement pots. As you say AJ Bell seems to be favoured in this regard.

However, has your sipp provider reached out to you with their opinions as to how your illiquid commercial property sipp can prepare for the proposed new 2027 regime for IHT on sipp pots?

I see no reason why commercial property sipps will be exempted from the new regime, so it may be that going forward a significant proportion of your rental stream may need to be retained in cash, against the putative iht exposure unless some form of loan facility  ( to pay the tax) can be negotiated to be put in place  when needed. 

This is not an issue that will be of any concern to the vast majority of forum members, but do wonder whether this has yet to feature in the forward planning for your sipp.

It is a good point for the OP to think about, but I could guess that the SIPP provider will be reluctant to make comment, as the details of the legislation are still being drafted and consulted about.

I certainly agree sipp providers generally will be reticent in putting forth considered views, pending the end of consultation and a more detailed road map of what this will mean for the industry.

However, if I possessed a commercial property sipp of some magnitude i would like to think my provider already had on their thinking caps of possible contingencies to address liquidity issues the new regime will throw up.

 Some form of line of secured credit seems one possibility   ( although complicated if secured mortgages already in place ), but over the next couple of years I would certainly be  rethinking  my desire to re-invest the rental income cashflow over the medium to long term, in the absence of the abilty to easily access credit to meet the tax when due.

housedesign1

Thank you for your helpful comments.

I would prefer to hold the property with Dentons, however the transfer of title and administration would cost in the region of £5,000+ including legals so am minded to leave where it is.

Hargreaves Lansdown have twice confirmed they will not accept commercial property rent for investment 'this is not a service we offer'.  AJBell tells me it is administratively time-consuming and they recently received all the II clients moving over due to II shutting 'external SIPP trading accounts' down recently too.  I believe AJBell still facilitate third party SIPP trading accounts as they take care of their historical clients from when they used to hold commercial property within SIPPs themselves.

XPS will do the transfers out.  Interestingly they first insisted that an IFA was required to be intermediary, named on the paperwork and a fee paid to them on an ongoing basis, however we, the beneficiaries, would be administrators, handling set up, process and investment with the IFA doing nothing for their fee.   We pushed on the matter and XPS acquiesed - no IFA being used in the process.

XPS have not been in touch, nor have they published anything, regarding proposed new IHT rules but as Albermarle has stated, perhaps they are reluctant until consultations are complete.  However my experience of XPS is as a very hands off provider with little to no communication.

Yes, we will have to hold a balance with XPS to cover fees.  And must give good consideration to the new IHT rules and available cash.  It may be that at the next tenant lease end (September 2031), we create a new 10 year lease on a good rent and sell at this point, realising the most profitable return possible.  Proposed new regulations have removed a large chunk of the appeal/benefit of holding commercial properties in SIPPs.