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Standard Life to scrap Sipp commercial property borrowing

Standard Life is removing a facility that allows Sipp 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. This means a person with a total pot worth £100,000 is able to buy an asset worth up to £150,000.

But Standard Life has confirmed that from 13 January this option will no longer be available to Sipp investors.

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.

“For clarity, the Standard Life Sipp is not withdrawing from commercial property and it is still an allowable investment. However, we will not 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.”

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.

Property questionnaires can be submitted to the provider up until 13 January. Advisers and scheme members will then have until 10 February to instruct solicitors to go ahead with a transaction.

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.”  

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. This appears to be strange timing when much commercial property, particularly in the regions, could be purchased at competitive valuations and (especially) yields.

  2. Claire Trott - Talbot & Muir 10th January 2014 at 1:47 pm

    Borrowing and commercial property purchase generally goes hand in hand. It is an expected option, if commercial property is allowed in the scheme.

    I believe, this may restrict a good number of advisers from looking at Standard Life for property purchase or those clients that may want it in the future. In addition, borrowing isn’t always taken out at outset so if it is required at a later date a costly in-specie transfer would be needed to a provider that would facilitate it.

  3. I agree that this seems strage.

    I guess that, as trustees, they feel they are acting with best intentions but I’m in favour of providers not forcing the hands of advisers/clients.

  4. SIPP or PPP then? Too many people have a SIPP when all they need is a PPP already anyway, but to remove the ability for someone who wants a SIPPs full options including borrowing fro purchase shows that Std life is adjusting it;s target market.

    If a client needs a SIPP to hold a commercial property, I’d not have used Std Life anyway! Plenty of good specialist SIPP and SSAS firms out there.

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