Picking the best Sipp for investing in property

The third thematic review and revised capital adequacy requirements both put additional burdens on Sipp operators with the result that some Sipp operators could be exiting the market or might be ripe for takeover, he says.

He adds some providers impose their own restrictions or conditions. Examples include being able to use only a proportion of the fund for commercial property rather than all of it, to insisting on the use of their own solicitors, valuers, property managers and insurers.

Also where some of the management, etc, can be undertaken by the member/their advisers, Mr Tilley says this reduces the role of the Sipp operator and thus could save money.

If the choice of Sipp for investing in property transpires to be poor, Andy Leggett, head of Sipp business development at Barnett Waddingham, says it will almost certainly be difficult and expensive to change Sipp later.

Mr Leggett says that is because it is a change of ownership: it is the Sipp that owns the property, not the individual.

Part of the decision of which Sipp to select is to consider the details of what the investor is looking for, he adds.

One question to ask is whether the investor is looking for a packaged solution. Some Sipp providers insist on their chosen parties being used – a pre-selected solicitor, surveyor and bank, Mr Leggett points out.

On an ongoing basis, Mr Leggett says some providers insist on conducting all aspects of property management and administration while others may allow the Sipp member or their chosen party to do this.

Mr Leggett says account should also be taken of the provider’s experience in buying and managing property, their service levels and a view taken on the outlook for the provider – for example, will it continue to allow a flexible approach to property or could a change in ownership or business model see its offering reduced.

He says: “The thing that so many investors and even financial advisers do not consider is how things may change and what may be needed in future.

“What starts out as a ‘bog standard’ property case can change. For instance, should the investor die before their time (cancer, perhaps), the family may not want the property to be sold, they may want to keep it in the family.

“Will the provider allow the death benefit to be ‘paid’ in specie?”

Is it always best to deal with a Sipp provider with good historic experience in all types of commercial property purchase, says Claire Trott, head of technical support of Talbot & Muir.

Moreover, she says providers who deal with the particular type of property purchase you are looking to purchase is also important.

Providers who offer the whole range of commercial property within their Sipps will be better placed to be able to deal with any unforeseen circumstances and Ms Trott says you are less likely to get part way into a purchase and the provider pull out.

While complexities do exist with this sort of investment, Robert Graves, head of pension technical services at Rowanmoor, says facilitating it should be standard fare for the experienced bespoke Sipp operator.

For the adviser, Mr Graves says property investment offers an opportunity to demonstrate added value to the advice service, especially when there is talk of greater ‘disintermediation’ through more online direct-to-market investment propositions.