She adds that any provider who has been in the Sipp business for a reasonable amount of time will have a strong background in commercial property. “The Sipp profession was built on commercial property purchase after all.”
Restrictive approach
Barnett Waddingham’s head of business development, Andy Leggett, says that some operators are taking a more restrictive approach to property and their underlying reasons are likely to vary.
“Some may be moving away from property because they are adjusting their business models to concentrate on their own platform - where they have one - or simply to concentrate on standardised business that is high-volume, low margin and highly mechanised - the antithesis of direct investment in commercial property,” he says.
But others may be motivated by diluting the proportion of their Sipp book invested in non-standard assets in case the final basis for calculating the capital adequacy requirement remains little changed from the original proposal. He adds that some operators will be trying to cherry-pick property business so that they avoid issues that can arise with property investment, such as rent arrears and a liquidity crunch within the Sipp.
“Over time, advisers and their clients will come to realise the advantages of taking direct property investments to bespoke Sipp operators, even when the initial scenario appears straight-forward. Sadly, it sometimes takes a crisis before the penny drops - for example, in a case we were told of where the member died unexpectedly, the property proved difficult to sell and the operator would not allow death benefits to be paid in specie,” Mr Leggett says.
One aspect of Sipps that is yet to be fully regulated is that of holding non-standard investments. Table 5 (overleaf) details the types of investments allowed in each Sipp, from bank accounts and commercial property to off-plan hotel rooms and gold. The Table remains largely unchanged from previous years, as non-standard investments could be one area where providers are holding off making any changes until any final rules are published. Further detail on retirement options can be found in Table B and information on cash accounts can be found in Table C.
Ms Trott says, “It is clearly the responsibility of the provider to be sure they can administer the assets they accept into their schemes. However, there is a line to be drawn between accepting it and deeming it suitable as an investment for a particular client.”
Checking that the adviser is regulated to be giving advice is one way to try and protect the client further but she says this is not going to stop someone recommending an investment that fails. “Only a crystal ball could do that,” she adds.
