One of the reasons SIPPs remain popular with advisers and their clients is their flexibility in relation to the control of investments, writes Martin Tilley.
While the vast majority of an adviser’s clients’ pension needs can be satisfied by insured personal pensions or platform-based SIPPs, full SIPPs are niche products required only for the cream of the adviser’s client portfolio.
In many cases this might be only, perhaps, the top 3% to 5% of their clients, who will appreciate the control and flexibility these products offer – particularly investment in commercial property.
At our recent series of nationwide educational roadshows for advisers, we collected some statistics. Of the 154 advisers who attended our sessions and voted, more than 60% had advised clients on full SIPP products, while 12% had more than 10 full SIPPs in their individual client bank.
Full SIPPs are those with investments outside of a platform-based or discretionary managed portfolio. By far the most popular non-platform investment was direct commercial property.
Of those that did not have full SIPP clients, several stated opportunities had not arisen and others that they felt insufficiently knowledgeable in the area to identify opportunities for their clients.
There were also those who rightly stated a reluctance to advise on SIPPs investing into non-standard and unregulated assets for fear of retrospective claims should the investment fail. The sessions revealed new cases were not frequent, requiring some of the advisers to seek guidance for complex cases as and when these occurred.
Advisers also felt it was difficult to keep track of the niche full SIPP market as several SIPP operators have changed their property and non-standard investment propositions since the introduction of higher SIPP operator’s capital adequacy levels.
They acknowledged the need to review the market regularly so that both current and future clients’ needs could be accommodated – and this had resulted in many cases of multiple transfers between SIPP providers.
By far the most questions asked were in connection with joint property ownership, which many advisers were unaware was possible. It is and always has been possible for a SIPP to jointly own property either with other SIPPs, with the client’s company or even directly with other individuals including the client themselves.
Separate borrowing for each joint holder can also be arranged although, in practice, this would need to be all through the same lender. It is also necessary to limit the liability of each party to their respective interest in the property.
Ownership proportions can be varied over time through sales and purchases between the parties, allowing phased acquisition of the entire property and other planning opportunities – especially if the vendor is the member, where it should be possible to control potential capital gains tax liabilities.
Armed with this information – and the knowledge a commercial property does not need to be wholly owned or completely sold – advisers should be able to spot the potential for movement of ownership between corporate, personal and pension schemes to suit the circumstances of the client.
When talking to advisers, one point that did become clear was that each case is different and each will have its own peculiarities. As such, having an experienced technical team to assist with potential new clients and training is a key differentiator between SIPP providers and vital if more advisers are to become involved in this specialist area.
Martin Tilley is director of technical services at Dentons Pension Management