Sipp property transfers hindered by higher fees
Self invested personal pension property investors are often unable to move providers because of the unexpected high costs involved, Suffolk Life has claimed.
Greg Kingston, head of marketing at the Sipp provider, said feedback from advisers who want to change Sipp providers showed they cannot justify moving their clients “because of the costs involved in transferring their clients’ commercial properties”.
Mr Kingston said: “It is not just the Sipp exit charges but the costs to transact the property disposal. Advisers are finding that the fees to sell the property from the old Sipp are significantly higher than the fees charged to transact the original acquisition.
“Some of these fees will have been introduced since the Sipp was first established and, of course, the adviser needs to charge for their work too. There’s no fundamental reason why it should cost more to sell a property from a Sipp than acquire it - quite the opposite in fact.
“They’re being prevented by high Sipp exit fees, and higher - sometimes opaque - exit transaction fees for property. Advisers and investors should question fees that appear to be unclear or not reasonable for the work required under TCF outcome 6 if necessary.”
In 2011, Suffolk Life completed over 320 new property acquisitions but less than 20 of these were transfers from other pension schemes, continuing the same trend from 2010.
Dominic Savage, property director for Suffolk Life, added that the ongoing servicing of the property and Sipp may be cheaper and more efficient with the new provider “but unexpectedly high exit costs make it difficult to justify a move”.
He said: “This is in spite of all the other involved parties - valuers, solicitors, new Sipp providers - working together to smooth the process and be flexible on costs. The one party in the process that we cannot influence is of course the current Sipp provider.”
City Trustees agrees with Suffolk Life adding that due to the “complex nature” of the asset, there are often expensive exit, set-up and legal fees in respect of the in-specie transfer.
Iain Herbertson, managing director at City Trustees, said: “This tends to result in clients remaining with their existing provider, and reluctantly having to continue to accept poor service.
“City Trustees recognises that there is an opportunity to help IFAs with this issue and pick up good quality ongoing business. To help clients facilitate a transfer from another provider where existing administration issues exist, we are running a property transfer campaign.”