We have also had to deal with the introduction of investment pathways and the proposed change in legislation around the normal minimum pension age. As a provider, we have to be conscious of/make plans for all these kinds of things. In addition, the change to minimum pension age (from 55 to 57) will impact providers, as well as clients and advisers, because we’ll have to ensure that our systems can accommodate the nuances that’ll appear as a result. For example, we’ll potentially have to ring-fence some of our clients’ assets in schemes that allow them to take their money at age 55 however, for other clients, their rights to their schemes may only be available from age 57.
As a business, I’m pleased to say that we weathered the pandemic storm very well. We managed to keep the business going, the phone lines open, and the professional level of service that we pride ourselves on, continuing. It is also particularly pleasing to note that our new business figures were up 55% in the first half of 2021 compared to 2020. Overall, new business cases in 2021 were up 26% compared to 2020 levels and up 27% compared to pre-pandemic 2019 levels. In addition, the number of enquiries that we received in commercial property in Q1 of 2021 outstripped those of Q1 2020 and Q1 2019. Therefore, it seems that year on year, we are consistently getting more enquiries – particularly in commercial property where we specialize. 2021 saw an increase in commercial property purchase new business cases of 13%.
RT: What do you see as the main challenges to advisers when using commercial property investment on behalf of clients?
SM: One of the most prevalent challenges that advisers are facing is in regards to clients who want to borrow funds from a commercial lender to buy a property. The market is quite difficult at the moment, and it appears that only a small number of commercial lenders are prepared to lend funds to SIPP and SSAS. So, if a pension scheme does need to borrow funds, it can obviously be quite difficult to find a lender. However, this is hopefully only a short-term issue as historically, commercial lenders have been keen to lend to pension schemes to buy a property – as the pension scheme is a separate legal entity from the client’s business (and the client as an individual) and the lender generally gets good title to the property.
Nonetheless, it doesn’t always have to be a commercial lender that’s lending to the scheme. Some providers – ourselves included – will allow a connected party, for example, to lend funds to the pension scheme, and that connected party could be the client as an individual, or the client’s company etc.
This still has to be done on fully commercial terms, but it does potentially deal with one of the challenges presented to clients. If a commercial lender needs to be involved it might be more difficult, but if there is a willing and able connected party member available to lend funds, this can make the purchase happen.
One other aspect of this is that a typical, small industrial unit on an industrial estate is not coming on the market very often. Therefore, if it does come on the market, it really sticks out and can sell for a good price. Now that’s great if you’re the vendor, and you have those units to sell, but it’s not so great if you’re a purchaser looking to get hold of one of those industrial units at a reasonable, fair price. It’s unbelievable to think that a small industrial unit can be a key aspect of commercial property, but that’s the state of the market today.
It’s an ever-changing market and we’re completely focused on delivering the service and support which advisers need to ensure that their clients are efficiently and effectively looked after.
