Xafinity’s self-invested pension business has reported an increase in the number of investors turning to commercial property investments.
Some 178 commercial property transactions were completed in 2017 under the pensions specialist self-invested personal pension (Sipp) and small self-administered scheme (Ssas) businesses.
The total value of these properties in 2017 was £62.3m, a 38 per cent increase, when compared to £45m worth of properties bought in the previous year, the company said.
According to Jeff Steedman, head of business development for Sipp/Ssas at Xafinity, “directors of SME companies are continuing to use their existing pension plans to self-invest into their business”.
He said: “Putting property into pensions remains an excellent tax efficient way for SMEs to grow their pension funds for retirement, as the rental income alone can provide excellent growth.”
Xafinity said that “there is clearly a huge opportunity for further growth in this sector, as the tax benefits within pensions are so compelling”.
The property prices ranged from £35,000 for small office properties to several valued over £1.5m, Xafinity said.
The company administers self-invested pension assets worth in excess of £1.9bn and has over 5,000 clients.
During last year, over 100 new IFA firms started doing business with Xafinity, Andy Bowsher, director of self-invested pensions at the firm, said.
He suggested advisers sought out Xafinity for what he said was its "clean book".
“We are just beginning to see the tip of the iceberg on toxic assets emerging for Sipp providers.
“Strong governance since our Sipp launch over 10 years ago means we shunned the numerous invitations to sell volumes of Sipps incorporating many ‘interesting’ investments. This is what advisers should be looking at more closely in 2018.”
Sipp providers and advisers have become extremely wary of what the regulator terms 'non-mainstream' assets, after a serious of high-profile problems for unregulated investments such as Harlequin, Connaught and Stirling Mortimer.
The compensation paid to investors via the Financial Services Compensation Scheme who were holding their pensions in Sipps went up by 35 per cent to £105m in 2016/17.
The FSCS’s annual report said of the Sipp-related claims increase: “These investments are often high risk and unsuitable for most investors. Their riskiness means some investments inevitably fail and become illiquid.
“This trend began two years ago and has continued this year, with claims against an increasing number of failed life and pensions advisers.”