Standard Life has shocked the Sipp market by removing a facility that allowed investors to borrow up to 50 per cent of their fund to buy commercial property in response to “challenging” market conditions.
Under Sipp rules, investors are allowed to borrow up to 50 per cent of the value of their fund to invest in commercial property. However, Standard Life removed this option for investors in its Sipp from 13 January.
Standard Life head of consolidation Alistair Hardie says: “We have 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.
“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.”
Standard says Sipp customers who already have a mortgage will be unaffected by the change and will, in future, be able to negotiate remortgage facilities.
Dentons director of technical services Martin Tilley says: “I am surprised by this decision. About 70 per cent of our commercial properties are cash outright but that is still a big part of the market Standard Life is cutting itself out from.
“We have had no issues with borrowing and are not aware of the problems mentioned by Standard Life.”
Concept Financial Planning managing director Paul Richardson says: “Standard Life is a good quality, large-scale player in this market so it is surprising it has taken this view.
“Clearly this will limit the investment choices for Standard Life Sipp investors and it raises questions about whether other providers will follow suit.”