Your Industry  

Two Sipps, 2 clients and a jointly held property

Matthew Robinson

Q: My clients – two directors – are looking to transfer their existing Sipps, which contain a jointly held commercial property, to a new provider.

The current provider is an insured Sipp and its limited range of investment options no longer suits my clients’ needs. The property is owned outright and we are building significant investments.

A: This is a common enquiry, which needs careful consideration given the property is held between the two clients.

Article continues after advert

The property can be moved to a new provider as two ‘in specie’ transfers. A bespoke provider may be most appropriate if the directors are looking to diversify their portfolio. Checks on providers’ capital adequacy position and accepted investments should be made, as some providers may restrict certain investment classes prior to the new Sipp capital adequacy regime, this September.

Costs associated with the property transfer should be carefully considered. Searches and surveys will be required to satisfy the new provider that the property is acceptable as a scheme asset. This valuable exercise reduces the risk of open-ended liabilities for all parties. If a valuation has not been undertaken by a Royal Institution of Chartered Surveyors firm in the past six months, a new one will be needed. It is likely two solicitors will need to be involved; one to represent the ceding provider and the other, the new provider. The new provider may also have other fixed requirements, such as the need for a property manager, or new property insurance.

It is important to fully understand the relationship between the two directors when determining the best pension vehicle. Assuming they are owner-managers of the same limited company, a Ssas may be most appropriate, as it can offer the directors a loanback facility. It is also an excellent business planning tool for a limited company. The operation of the Ssas, including the role and responsibilities of being a member trustee of the scheme will need to be fully understood by the directors. They should also consider ongoing investments in terms of risk and liquidity. These last two points relate to taking benefits, or transferring out.

The directors could also consider a family Sipp. This is a registered pension scheme with its own deed and rules. Some family Sipps enable clients to have an account each and make private, individual investments, in addition to any joint, pooled investments held within the scheme.

The cost of transferring the property to a Ssas or family Sipp is likely to be less than two individual Sipps. Both the Ssas and family Sipp will only charge one property transaction fee and there will only be one legal fee associated with the new arrangement.

Should the directors choose two Sipps, they will need to consider ‘what if’ scenarios, such as future costs and liquidity. For example, if one wanted to sell their share of the property, would the other have the assets to secure the property outright? If not, could borrowing be arranged? In these scenarios it is always worth assessing the merits of all the alternatives, to best suit the clients’ needs.