Round table report: Does it still make sense to put commercial property into a pension scheme?

Now is as good a time as any to put commercial property into a pension scheme, but a lack of understanding surrounding the options available could be holding people back. That was the abiding message at our latest round table event sponsored by Lawson-West solicitors.

The consensus amongst delegates was that the commercial property market is currently a mixed-bag – but that this shouldn’t put people off investing.

Finance is less readily available but there is plenty of pent-up demand, particularly in the industrial sector. Indeed, as one delegate argued, “commercial property is tangible so there’s still an appetite for it.” Retail demand may have slipped significantly, but a number of investors are turning to conversion projects as an alternative to traditional retail use.

Our experts agreed there has been no discernible drop-off in the volume of investors putting commercial property into pension schemes, with owner-occupation driving demand from a pension’s perspective.

However, some investors’ failure to understand the differences between SSAS (Small Self-Administered Scheme) and SIPP (Self-Invested Personal Pension) schemes could potentially curtail growth in the industry, they warned.

“SSAS has a major advantage over SIPP because members are the governing party, and a SSAS is a service provider rather than a product”, one expert argued. This explains why a SSAS is a better bet for those looking to tie commercial property assets to a pension scheme; moreover, consumer duty doesn’t apply to SSAS. By contrast, “the SIPP industry is inherently complex.”

The panel agreed economic headwinds haven’t necessarily changed the picture. Those with property assets are generally still looking to invest – and people are still looking to invest in property – despite what one panellist described as a certain “apathy” in the market.

So, are there any potential obstacles to overcome? “Processing time is becoming an issue”, but prospective investors concerned about a lack of funds in their pension scheme needn’t worry unduly. It is possible to secure commercial lending, invest in tranches, seek joint ownership with other pension schemes and utilise loans from their own SSAS.

Regarding the tax implications of putting commercial property into a pension scheme, “if you’ve got a good business, why wouldn’t you do it?” was the consensus. The practice is “very advantageous from a tax perspective”, although our experts agreed that investment decisions based solely on tax benefits are ill-advisable.

In terms of due diligence, this is “essentially the same” as if an individual is buying a property. However, as host Rebecca Beswick of Lawson-West concluded, “it is vital for potential investors to take advice from a network of advisors” to ensure transactions are completed smoothly and the correct purchase vehicle is used which may not necessarily be a SSAS or a SIPP.

Panel:

Rebecca Beswick, Lawson-West Solicitors
Beverley Heys, Lawson-West Solicitors
Jon Archer, Andrew + Ashwell
Ian Evans, TheBusinessDesk.com
Paul Monk, Furnley House
David Santaney, Westbridge SSAS
Rachael Stembridge, Mazars
Richard Sutton, NG Chartered Surveyors
Peter Tew, Peter Tew and Co
Martin Tilley, Westbridge SSAS
Peter Wareing, Ridge and Partners
Darren Willoughby, 2XL Commercial Finance