A-Day passed without too much fallout although the unnecessary deadlines imposed by HM Revenue & Customs for the completion of commercial property purchases requiring 75 per cent gearing created an unnecessary workload.
The draft rules were issued for the definition of residential property and also for the lump sum recycling requirements but, as usual, there was no indication as to when they will be finalised.
What now? Interest in self-invested personal pensions as the default pension framework is growing and the number of enquiries is increasing daily.
The enquiries span the breadth of all the opportunities that the Sipp framework can bring, as clients can now take advantage of alternative investments such as unquoted shares, residential property funds and private equity investments.
It is an exciting time as the marketplace settles down and providers start to reveal their products and services.
But the new world of pensions is not at all simple and the opportunities that can be used can make the role of scheme administrator and adviser pivotal in decision-making.
There has been much speculation here and many product providers are saying that they will not deal with them.
There are also few advisers who are prepared to advise on the matter so many transactions will be on an execution- only basis.
What do scheme admin-istrators have to consider? They must ensure that there is an appropriate valuation of the shares that will satisfy HMRC and that the scheme members understand the risk. They may need to implement specific criteria that need to be followed, such as limits to the amounts that can be invested and the costs of these transactions.
From the number of enquiries being received, this will undoubtedly be a growth area of activity.
There was a belief that the volumes of commercial property transactions would fall after A-Day due to changes in the borrowing criteria but this is not being played out and we are now getting slightly more purchase applications.
The ability of individuals to fund their pensions more generously, together with the lifting of the connected party rule, has had a positive impact. It is encouraging individuals and company directors to consider buying their business premises via a syndicated Sipp scheme and releasing liquidity back into their business.
We are getting asked every day about different schemes which fall within the draft rules that were issued recently.
Some pressure is being applied for action to be taken now. However, caution is recommended.
Anything can change until the rules are final and any action taken today may have to be undone if the Chancellor should have a relapse like he did last December in his pre-Budget report.
There are also many questions unanswered in terms of see-through structures and how these may affect the balance of Sipp borrowing for the purchase of an asset involving residential property.
As the traditional insurance companies relaunch their group personal pension offerings under the new brand of a group Sipp, many advisers are resisting the urge simply to churn their existing book of group personal pensions into group Sipps.
The ability to offer truly bespoke pension schemes to meet each company’s specific needs is vital. One size does not fit all.
Family SippsApparently, insurance companies are setting up nominee accounts for children, with nothing in them and attracting no fees, but which are technically Sipps for use in the alternatively secured pension scenario, for the transfer of pension scheme assets from one scheme to another.
I am not convinced that this is in the spirit of the rules. Any Sipp should be active to some degree to be classified as a Sipp. I am not convinced that one can have an empty shell lying dormant for years awaiting an event which may or may not happen before it gains assets.
Maybe the industry should be promoting the use of Sipps for all family members in the fullest sense. A bit of holistic financial family planning is needed.
There is much for HRMC to finalise. We will just have settled down by the time all Sipp administrators are required to become regulated. Another set of rules to implement in 2007. Yippee.