Pooled property purchases in Sipps can help clients
Commercial property can be a beneficial alternative investment in some clients’ pension portfolios, but few advisers are recommending them, research from Suffolk Life has found.
Just 38 per cent of more than 250 IFAs surveyed by the self-invested personal pension provider had recommended a joint commercial property purchase for a Sipp, while 70 per cent said they had advised clients to make a sole commercial property purchase.
Claire Trott, pensions technical manager for Suffolk Life, said joint ownership, which pools investors’ assets so that they can purchase a commercial property, offers increased liquidity, diversification, flexibility and of more buying power.
She said was “remarkable” that so few advisers have recommended a pooled purchase, while so many hade advised on a sole commercial property purchase for their clients’ Sipps.
She said: “This presents a business opportunity for IFAs to help local businesses or individuals that previously may have thought they were not in a position to purchase their premises.”
Dominic Savage, property director for Suffolk Life, said he is seeing more business partners and family members pooling their funds to purchase commercial property.
Instead of taking out a loan, they see pooled purchase as a cost efficient way to buy the commercial properties which they might already be renting.
Mr Savage said: “It is a flexible approach as there is no limit to the number of investors that can jointly purchase a property. Our largest case is a group of 80 barristers that use their Sipps collectively to own their chambers, also providing a good example that there’s no requirement that ownership percentages in the property are equal.”
Ms Trott added: “With the majority of advisers choosing service ahead of costs when selecting their Sipp provider for property work, there’s no reason why group purchases won’t continue to increase.”
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