Standard Life has confirmed will no longer take out commercial mortgages on behalf of self-invested personal pension members, citing “challenging market conditions”.
Under Sipp rules, members can borrow against the pension up to half of its net value, potentially using rental income from the property to repay the loan. The loan provision is not limited to use for property purchases.
Previously Standard Life Trustee Company would take out a mortgage on a commercial property on the customer’s behalf. The mortgage would be in SLTC’s name and the company would be the legal owner of the property. The customer would then be responsible for meeting monthly mortgage payments.
The insurer has said it will no longer offer this facility, stating that falling property values and the rising frequency of missed rent payments are making market conditions too ‘challenging’ to continue to do so.
Alistair Hardie, head of consolidation at Standard Life, said: “We’ve made the decision to no longer support the purchase of a commercial property by a mortgage purchased by Standard Life Trustee Company through a member’s Sipp.
“For clarity, the Standard Life Sipp is not withdrawing from commercial property and it is still an allowable investment. However, we won’t facilitate borrowing to purchase a commercial property.
“The reasons for this decision are the commercial property market is experiencing challenging conditions; property values have fallen and rent payments are not being made, with cost and risk implications for us as the property owner and landlord; and 80 per cent of customers investing in commercial property do so without the need for a mortgage.
“Customers who already have a mortgage with us will be unaffected by this change and will, in future, be able to negotiate re-mortgage facilities.
“A pipeline will exist and property questionnaires can be submitted up until the 13 January 2014 and we need to receive the instruction from an IFA or member to instruct solicitors by 10 February 2014.”