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Want to transfer a SIPP or SSAS that holds property? Here’s your complete guide

One of the trends we have noticed over the last 12 months is a significant increase in the number of enquiries we are receiving for transfers of existing SIPPs and SSASs that hold commercial property.

Usually, these conversations start with a real hesitance from the adviser about undertaking the transfer. They perceive it as too complex, too costly and, frankly, a bit of a headache.

We won’t deny that a transfer in-specie of property can be a challenge! But we can help make the process as smooth as possible.

Before we look at the transaction in more detail, it may be beneficial to look at some of the trigger points for initiating a transfer.

3 reasons a client may want to initiate a transfer

  1. The service a client receives is not in line with their (or their adviser’s) expectations

Advisers tell us that service levels differ greatly when dealing with providers who administer commercial property.

Some larger companies don’t offer this as part of their core proposition, but more as an “add-on” or hybrid to their simpler PPP or SIPP offerings. Other companies used to have high levels of personal service, but this has changed over the years.

We are also being told by advisers that, since the initial national lockdown in March 2020, some providers are not able to provide the tailored support required to clients in this bespoke area of pension planning. This is leading to frustration and delays in actioning requests.

  1. The costs with the current provider are high

Holding commercial property within a SIPP is at the higher end of what you can expect to pay in fees to a pension provider.

Most providers will charge an annual administration fee for the SIPP. Clients can also expect to pay additional annual fees for holding the property, for any borrowing, or for being part of a group.

Feedback from advisers is that clients accept this if the service being provided is in line with expectations.

However, this can still run into thousands of pounds every year, multiplied by several clients if part of a group. If the plan is to hold the property for 10, 15 or 20 years, this can add up to a lot of money!

Furthermore, we understand that a few providers have increased their costs for this kind of work over the last couple of years. IPM is proud that we offer one of the most cost-effective offerings in the market for this type of SIPP and our annual administration fee has not increased since 2001.

  1. The original pension arrangement is no longer suitable

As discussed in our SIPP v SSAS blog, a SSAS may have been the right solution initially, but client circumstances change. This may mean that running a SSAS is no longer necessary, or the clients no longer want to do this.

Transferring can be time consuming and expensive, but is often worthwhile

We’re not going to promise you that a transfer in-specie of property will be the easiest of things you will undertake. In addition, there are costs involved, which is why we say that there is usually a trigger for a transfer to take place.

The key things to remember are the third-party costs of transferring the property.

Although the beneficiaries of the pension may not change, the legal owner of the assets will change from provider A to provider B.

As a result, both providers will need to appoint solicitors to act on their behalf in the transfer. This is because what one provider may be prepared to accept may not necessarily be the case for another (especially when looking at a transfer in-specie from a SSAS to a SIPP).

So, what fees and costs are payable?

  • Legal fees – on average, IPM’s panel solicitors will charge around £2,000 + VAT to act on a transfer. It’s fair to assume the other provider’s solicitors will charge a similar amount.
  • Valuation fee – a valuation will also be required from a surveyor for the receiving scheme. If one has been produced in the last 12 months this could be considered to save on costs.
  • Transfer fee – you will also need to consider fees from both providers for actioning the transfer; the receiving scheme will usually charge a “transfer in” fee while the ceding scheme is likely to charge a “transfer out” fee.

If you have borrowing on the property, this also adds complications. These are not insurmountable, but is something you and your client will need to consider.

If you start with the premise that a transfer in-specie could cost in the region of £5,000 + VAT or more, in total, then this will give your client a decent base level of expectation.

It will also take time, especially if the reason why you’re moving from an existing provider is because of a poor service level! Again, it is best to set out this expectation to clients before the transfer commences.

We have seen some property transfers complete in a matter of weeks when all parties involved have been proactive… however, we have had some take more than a year!

Read: 8 weird and wonderful commercial properties our clients hold in a SIPP

So, why would my client bother to undertake a transfer?

We have undertaken many of these transactions over the years.

As mentioned, we have one of the most cost-effective offerings for commercial property in the marketplace (you can find out more here). Consequently, the cost of transfer can often be offset by the savings your client makes in terms of the annual fees being paid to the current provider.

If the property continues to be held within the SIPP this is approximately three years, in our experience.

Remember that any existing lease in place can usually be adopted by the new provider as part of the transfer process. Additionally, in-specie transfers of property are usually not subject to Stamp Duty Land Tax (SDLT).

If the aim is to hold a property in the pension for 10 to 20 years, then this can be a long time to put up with any of the three issues mentioned above. This is particularly relevant when considering generational planning and passing assets down the line to children or grandchildren.

Read: Why SIPPs can be a great choice for intergenerational planning and two cases studies that illustrate the power of SIPPS when it comes to passing on wealth

Where you have more than one client with an interest in a property transfer, the transfer costs (provider and third-party) are split between the number of clients involved. So, the more clients, the more cost-effective the transfer becomes.

As well as more competitive fees, we hope advisers and clients alike will benefit from our more personal approach and our high level of service when administering SIPP property.

If a client intends to hold a property for a long period of time, our hope is that any transfer may see clients suffer a bit of short-term pain for a much longer-term benefit, both in terms of cost and service.

Covid – and why this can impact a transfer in-specie of property

It seems the phrase “because of Covid” crops up everywhere these days! Unfortunately, the consequences of the national lockdowns and the change in working practices brought about because of the pandemic also impact transfer of properties between SIPPs and SSASs.

  • We have seen several businesses run up rent arrears since March 2020. While we are managing these situations as best as we can, this causes IPM (and all other SIPP providers) significant additional work. Therefore, if a property is being transferred to us with rent arrears, we would need more information before proceeding further.
  • If a property is VAT registered, we must make an application to the VAT office to opt the SIPP to tax. While this can be done alongside the usual conveyancing process, we cannot complete on a transfer until this application has been processed. Because of Covid, we are seeing significant delays in the VAT office processing these applications.
  • The shift to home working has impacted most companies. While most have adapted well, inevitably this has led to some issues. We are seeing all property related transactions taking a little longer due to the various number of third parties involved, and a transfer in-specie is no exception to this.

If you have any questions about transferring a SIPP or SSAS, please get in touch. Email or call 01438 747 151.

Get in touch

Whether it’s a question about a specific client or SIPPs in general, we are here to help. Call us on 01438 747 151, email or complete the form below: