Commercial property in Sipps could breach lifetime allowance

Commercial properties held in self-invested personal pensions (Sipps) risk causing a breach in the lifetime allowance, according to AJ Bell.

Mike Morrison, head of platform marketing at the firm, told Money Management that increasing rental yields could cause a problem for large pension pots.

“The big issue for me is going to be lifetime allowance,” he said. “If you have a good commercial property in your Sipp, if you have good rent coming in, that is a good investment return.”

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In addition to the value of the commercial property itself, a good rental income in an improving property market could tip some clients over the maximum amount allowed in a pension, Mr Morrison said.

“People with commercial properties should realise that if they keep enjoying that rental return, they might go over their lifetime allowance,” he said.

According to the latest MM survey on properties in Sipps, there are a total of 28,364 commercial properties, with an average value of £119,018, held across 45 Sipp operators.

Investors can seek to protect a higher lifetime allowance by applying for fixed and individual protection, although some have warned on advisers not fully understanding how to use the different types.