Find the Premier SIPP Provider for Commercial Property Investments in 2024

Choosing the best SIPP provider for commercial property is a critical decision for investors seeking to diversify their retirement portfolios with real estate. 

Self-Invested Personal Pensions (SIPPs) offer the unique opportunity to include commercial property as part of a broader investment strategy, combining the benefits of tax efficiency, potential income generation, and capital growth. 

However, navigating the complexities of commercial real estate requires a provider that not only understands the intricacies of property investment but also offers tailored services to manage these assets effectively within a SIPP.

In this article, the Every Investor team delves into the factors that set the best SIPP providers apart, including their expertise in commercial property, comprehensive service offerings, competitive fee structures, and exceptional customer support. 

By carefully selecting a provider that aligns with your investment goals and needs, you can maximise the potential of your commercial property investments and contribute significantly to your retirement savings.

Best SIPP Provider for Commercial Property

SIPP providers like Hargreaves Lansdown and AJ Bell allow investors to include commercial property in their portfolios, offering flexibility and potential for returns.

Firms such as Curtis Banks and James Hay are also popular choices due to their expertise in managing SIPP investments in commercial real estate.

Investors looking to diversify their portfolios with commercial property should consider providers like Interactive Investor and Barnett Waddingham, known for their competitive fees and strong customer service.

These firms offer a range of investment options and support services for those interested in SIPP investing in commercial real estate.

How Can Commercial Property Form Part of a SIPP?

Commercial property can form part of a SIPP in several key ways, providing a unique investment opportunity for individuals looking to diversify their retirement portfolios. 

A SIPP allows for a wide range of investments, and in some cases, this includes commercial properties such as offices, shops, warehouses, and industrial units. 

Commercial property can be incorporated into a SIPP in various ways.

Direct Purchase

The most straightforward method is through the direct purchase of commercial property using the funds held within the SIPP. 

This approach allows the SIPP holder to invest in commercial real estate directly, with the property title held in the name of the SIPP trustees.

Property Transfer

You can transfer a property you already own into your SIPP.

Doing so will mean you do not own the property personally any more and any rental income or capital growth will go into your SIPP.

Pooling Resources

Multiple SIPPs can pool their resources to purchase commercial properties that might be too expensive for a single SIPP to acquire alone. 

This can open up opportunities for investing in higher-value properties with the potential for greater rental yields and capital appreciation.

Borrowing & Gearing

SIPPs can borrow money to purchase commercial property up to 50% of the net value of the SIPP. 

How does that work?

If you want to buy a commercial building like an office or shop, your SIPP can borrow up to half of its value.

This can allow for larger investments than might otherwise be possible, potentially increasing the returns on investment through gearing.

There is a risk

If the property decreases in value, you could lose more money, as you will still need to repay the loan regardless of the property’s current value. 

This is a strategy that can make your investment work harder, but it comes with higher stakes.

Things to Know About Commercial Property Investments

Things to know about commercial property investments include details regarding diversification and tax treatment.

Tax Efficiency

Investing in commercial property through a SIPP offers significant tax advantages. 

No Capital Gains tax is charged on the sale of the property and no Income tax is charged on the rental income, which can lead to a more efficient growth of retirement funds.

Rental Income

Any rental income generated from the property is paid directly into the SIPP, providing a source of tax-efficient income. 

This income can be reinvested within the SIPP to grow the pension pot.

Capital Growth

If the value of the commercial property increases, this capital growth benefits the SIPP. 

Upon selling the property, any gains are tax-free within the SIPP, offering a significant advantage over personal or company ownership of property.

Diversification

Including commercial property in a SIPP provides diversification away from more traditional investments like stocks and bonds. 

This can help to spread risk and potentially reduce the overall volatility of the pension portfolio.

However

The need for ongoing management, potential vacancy, and property market fluctuations should be considered when investing in property. 

Additionally, SIPPs and commercial property may have strict rules regarding property type, leasing, and sale. 

In short

Seek specialist financial and legal advice when considering commercial property as part of a SIPP to ensure compliance with regulations and to make informed investment decisions.

The Benefits of Investing in Commercial Property Within a SIPP

The benefits of investing in commercial property within a SIPP are manifold, offering a compelling mix of tax efficiencies, the potential for steady income, and opportunities for capital growth. 

These advantages make it an attractive option for individuals looking to diversify their retirement savings and potentially enhance their pension portfolio’s performance. 

The key benefits are:

• Tax efficiency is a major benefit of SIPP commercial property ownership. Inside the SIPP, rental income and capital gains from selling the property are untaxed. 
• Rent from commercial properties can provide a steady income. Income paid directly into the SIPP grows your pension pot tax-efficiently. 
• Commercial property values can rise over time. This capital growth benefits SIPP holders because property value increases pension fund value. Significantly, SIPP gains are not taxed.
• Commercial property can diversify a retirement portfolio beyond stocks and bonds. Commercial real estate performance is often uncorrelated with stock market movements, which can help manage risk.
• SIPPs give investors more control over their investments, including commercial property selection.  People can make strategic decisions based on their retirement goals, risk tolerance, and market conditions with this flexibility.
• SIPPs can borrow money to buy commercial property, which can boost purchasing power and returns through gearing. This can maximise investment opportunities, but it is risky.
• SIPPs can pool resources to buy more expensive commercial properties that one SIPP cannot afford.  This collective investment approach may increase rental yields and capital growth by expanding investment options.
• When a SIPP holder dies, beneficiaries can inherit commercial property with tax advantages. This can help with estate planning and tax-efficient asset transfers to loved ones. 

The benefits of investing in commercial property through a SIPP are clear, but property management issues, vacancies, and real estate market fluctuations must be considered. 

Seek professional advice to navigate these aspects effectively and to ensure that such investments align with your overall retirement planning strategy.

The Risks of Investing in Commercial Property Within a SIPP

The risks of investing in commercial property within a SIPP are important to consider, as they can impact the performance of your retirement portfolio and your long-term financial security. 

These risks include:

• It is not as easy to sell commercial properties as it is to sell stocks or bonds. Selling a property can take time, and in some markets, it may be hard to find a buyer at the right price. 
• Economic downturns, demand changes, and local property market shifts can affect commercial property values. The property’s value may decrease, lowering the SIPP’s value.
• The SIPP holder must pay maintenance, insurance, and property taxes even if a commercial property is not leased. Unoccupied periods can devalue an investment.
• Commercial property owners must maintain and repair it to keep the property in good condition and legal. These costs can be significant and must be funded by the SIPP, potentially reducing the net income and overall return on investment.
• Health and safety, planning, and building codes apply to commercial properties. Avoiding these regulations can lead to fines, legal issues, or costly changes.
• If the SIPP borrows money to buy the property (gearing), interest rates can affect the loan cost. Interest rate hikes could lower net income and investment return.
• The quality of tenants can make or break a commercial property investment.  Late rent, lease defaults, and tenant dropouts can pose financial and administrative risks.
• Properties may be subject to environmental risks.

Given these risks, it is crucial for investors to carefully consider whether commercial property fits within their overall investment strategy and risk tolerance. 

Due diligence, diversified investments, and professional advice are key to managing the risks associated with commercial property investments within a SIPP.

Which Are the Best SIPP Providers for Commercial Property?

The best SIPP providers for commercial property are those that offer specialised expertise, competitive fees, flexible investment options, and robust support for managing and acquiring commercial real estate within a SIPP. 

The best SIPP provider depends on investment goals, financial situation, and property interests, but several are known for their commercial property investment expertise. 

These providers typically stand out due to their experience in the market, the range of services they offer, and their ability to navigate the complexities of property investment. 

Key considerations when looking for the best providers:

• Expertise in Commercial Property: Look for providers with a proven track record of managing commercial property investments within SIPPs. This expertise is crucial for navigating the legal, regulatory, and practical challenges of property investment.
• Comprehensive Service Offering: The best providers offer a full range of services, including assistance with purchasing, selling, leasing, and managing commercial properties. 
• Competitive Fee Structure: The best providers for commercial property investments offer transparent and competitive fees that do not erode the investment’s profitability. 
• Flexibility & Investment Options: Providers that offer a wide range of investment options and flexibility in terms of the types of commercial properties that can be held within the SIPP are generally more desirable. 
• Loan Facility: If you are considering leveraging your investment by borrowing within your SIPP, look for providers that offer competitive loan terms and have experience in arranging loans for SIPPs investing in commercial property.
• Customer Service & Support: Excellent customer service and support are vital, especially for investors who are new to commercial property. The best providers offer dedicated support, providing guidance through the complexities of property investment and pension administration.
• Regulatory Compliance & Security: Ensure that the SIPP provider is regulated by the Financial Conduct Authority (FCA) and has a strong commitment to compliance and security. This is crucial for the protection of your investment.

Depending on market conditions and SIPP provider trends, thorough research and possibly consulting with a financial advisor can help you choose the best SIPP provider for your commercial property investment needs. 

Remember, the right provider should not only meet your current investment criteria but also support your long-term retirement planning objectives.

Providers to Consider

Providers to consider when looking for a SIPP that offers commercial property investment are numerous, so we have compiled a list of prominent options.

Curtis Banks 

The Curtis Banks Your Future SIPP allows investors to hold commercial property in their portfolios. 

Property can be added in the following ways:

• Individual purchase, where you can buy a whole property through transfers or contributions within the SIPP, or by taking out a bank loan.
• Group purchase, where a number of Curtis Banks clients purchase a property by using cash from their SIPPs or through a bank loan.
• Joint purchase, where you have the option of buying a property with other buyers who are not necessarily Curtis Banks clients.¹

Standard Life

Standard Life allows commercial property investments in SIPPs.

Property can be purchased in the following ways:

• Individual purchase, where you buy a property to hold within the SIPP.
• Group or syndicated purchase, where a number of Standard Life clients buy a property together.

Types of property you can purchase include:

• shops
• offices
• warehouses
• industrial units
• factories
• land zoned for immediate development.²

Property types that are not acceptable include:

• holiday property
• caravan parks
• property outside the UK
• nursing homes
• properties that use solar power
• pubs
• petrol stations.³

This is not an exhaustive list; speak to your advisor and a Standard Life representative to make sure the property you have in mind, qualifies.

Killik & Co

Killik & Co allows commercial property investments in their SIPP.

Your application will be handled by Barnett Waddingham; once your property is approved for purchase, they will also handle the transfer and management.⁴

How We Chose the Best SIPP Providers for Commercial Property

We chose the best SIPP providers for commercial property based on several key performance and management factors. 

This process ensured that the selected providers are well-equipped to meet the diverse needs of investors looking to include commercial real estate in their retirement portfolios. 

Here is an overview of the criteria used in our selection process:

• Experience in commercial property: 
• Service range
• Fee transparency and competitiveness:
• Flexibility and investment options
• Loan facilities
• Customer support
• Regulatory compliance and security
• Reputation and customer feedback 
• Technological capabilities

We looked for SIPP providers that offer competitive and comprehensive commercial property investment services and support investors’ best interests, providing a solid foundation for a diversified and robust retirement portfolio.

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