SIPPs: Standard Life put an end to SIPP borrowing

Posted on January 10th, 2014 | Categories - News

SIPPs: Standard Life put an end to SIPP borrowingIn a surprising move, Standard Life has announced it will no longer allow SIPP (Self-Invested Personal Pension) investors, to borrow money to purchase commercial property.

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Buying a commercial property in a SIPP has long been a popular option for business owners and property investors alike and many have borrowed money to help fund their purchase. SIPPs can borrow up to 50% of their value, with the loan secured on the commercial property and repayments supported by the rental income.

SIPP commercial property purchase

The vast majority of SIPP providers who allow commercial property purchase also allow loans to be made to the SIPP, which the change, from one of the largest SIPP providers, all the more surprising.

Explaining the decision, Alistair Hardie, Head of Consolidation, said: “The reasons for this decision are the commercial property market is experiencing challenging conditions; property values have fallen and rent payments are not being made, with cost and risk implications for us as the property owner and landlord; and 80% of customers investing in commercial property do so without the need for a mortgage.” (Source: Money Marketing)

Existing investors will be able to continue with their loans and Standard Life will still allow the purchase of commercial property within their SIPP.

As the SIPP market enters a crucial year, with the FCA’s proposals into provider capital adequacy requirements due to be announced soon, it will be interesting to see if this is an isolated move or other providers follow Standard Life’s lead. Although industry experts have suggested that commercial property and lending go hand in hand, with many investors expecting to be able to borrow to help fund their purchase.