Proactive property management can maximise values, returns and asset performance – and minimise risks of ownership.
The introduction of the Pension Freedom rules has ignited fresh interest in pension investment and for those with large funds, the wide investment options coupled with flexible withdrawal has put the spotlight back on SIPPs (Self Invested Personal Pension Plans) and SASS’s (Small Self-Administered Scheme) for ownership / occupation of property assets within them and using commercial property as part of their overall pension plans.
In such cases, you may have opted for a SIPP or SASS, so involving a Chartered Surveyor as an asset manager and / or an RICS registered valuers in your plans could be money very well spent.
We believe that effective property management requires hands-on and proactive asset management initiatives.
We manage portfolios for property investors, companies, charities, trusts, pension funds, SIPPs, SSASs and individuals across a range of market sectors including industrial estates, multi-let properties, offices, neighbourhood shopping centres, rural estates, mixed property portfolios and individual single-let properties.
Indeed, we manage over 800 properties with a capital value over &120 million and over 1,400 tenants.
We also implement asset management initiatives from lease re-gearing, rent review and lease renewal optimisation to business rates management, valuation, consultancy, letting strategies, development advice and business plan preparation.
Both SIPPs and SSASs are regulated in the same way and in the eyes of HMRC, they're both investment regulated pension schemes, which means that the basic rules surrounding borrowing, lending and investment are exactly the same for both. But the legislation is applied slightly differently.
A SSAS is an occupational pension scheme, primarily intended for the directors and key employees of small businesses. It can have up to 11 members, who will all be scheme trustees. The assets are not owned by the individual members, but by the trustees as a whole, with members having a notional share of them.
This structure gives the trustees considerable control and flexibility of the investments, but also means they have to take on administration and regulatory responsibilities.
The range of allowable SIPP and SSAS investments is extremely wide and includes commercial property in the UK or overseas, including Real Estate Investment Trusts (REITs).
A major attraction of SIPPs and SSASs is that they can invest in commercial property which is let to the member’s company or partnership. You can even sell a property that you or your business owns to the pension scheme, although this might result in a tax charge on any capital gains.
Any sale transaction must use an arms’ length valuation, because there are tax penalties for ‘value shifting’. Similarly, the business must always pay a full commercial rent, which the SIPP or SSAS will receive tax-free.
A SIPP or SSAS can borrow up to 50% of its net assets for property investment (or any other purpose) so, for example, a SIPP with net assets of &500,000 could borrow &250,000 and spend &750,000 on a commercial property. Often SIPP and SSAS property purchase is financed by a combination of transfers from previous pension arrangements, new contributions and borrowing.
Please get in touch if any of the issues raised in this article are of interest, whether you hold SIPPs and SSASs, are considering them or you are an IFA, accountant or bank advising SMEs or high net worth individuals.
Jason Clines
jason.clines@fishergerman.co.uk