Table A looks into retirement options available and any other charges associated with a plan.
Gareth James, head of technical resources at AJ Bell, makes an interesting point in the run-up to the FCA’s requirements. “Will some providers look to increase charges to cope or will any firms restrict investment to the FCA’s standard asset list to manage the financial requirement? Only a limited number of clients will be affected by the latter as the vast majority of Sipps only invest in standard assets. Any increase in costs will be more widely felt and less welcome, particularly if the increase has no impact on those with Sipps not holding esoteric investments.”
Commercial property is one of the biggest attractions of Sipps. It is one of the asset classes most used within full Sipps, but it should be noted that many platform-only Sipps do not offer property as an investment.
For years, there has been debate surrounding whether or not commercial property should be classified as a standard or non-standard asset, but the FCA has declared it should standard, provided the transaction can be completed within the allocated 30-day period.
Table 2 looks in depth at charges for holding commercial property, covering allowable types of property as well as the number of properties among providers who offer it as an investment.
The number of properties has increased from 22,072 in October’s survey to 26,529 this year. The increase is of no surprise considering its popularity. The average property value has also risen slightly, as can be expected in the current market. In general, property fees have not changed dramatically, with few providers changing their figures at all.
As it stands, not many providers offer overseas properties, but it has been strongly rumoured that many providers still own Harlequin properties. Harlequin took £400m from UK investors and failed to build the majority of its properties abroad. But it should be kept in mind that this is a very rare case and the majority of commercial property purchases for Sipps have been successful.
Backbone of the industry
Chris Smeaton, director of commercial and strategy at James Hay, says although it is complex to administer, commercial property has been the “backbone of the Sipp industry” since inception and has caused little concern over the years. “If one Sipp provider goes out of business, it simply comes down to the cost of transferring it from one arrangement to another and that’s not particularly costly.”
Talbot and Muir’s Ms Trott agrees that property is – and probably always will be – one of the true bespoke Sipp investments. “Over the years, we have seen some of the mainstream pension providers try to compete in this market and many have failed. We have seen restrictions put in place to try to discourage the investment in commercial property by some providers, such as restricted borrowing, joint purchases, as well as not allowing the purchase of certain type of commercial property such as bare land, even if it is a good investment.
