Pensions expert Dentons is calling for UK commercial property to be reclassified as a 'liquid asset', as it often doesn’t fit comfortably in either standard or non-standard assets categories.
Martin Tilley, director of technical services at Dentons, has suggested a "halfway house" categorisation for commercial property, where an initial premium is paid by investors, but this premium should be lower than the equivalent paid for non-standard assets.
“If you look at UK commercial property, the actual transfer process is something called a TR1 form,” Mr Tilley told the Financial Times. “It is a transfer form so it can be done in a matter of days, and if you have to dispose of a property you could always put it to auction, which usually disposes of it within 28 days.
“So in terms of needing to get rid of a property, there will be a secondary market albeit not necessarily at the full price, but it is a sale of the assets.”
Mr Tiley added that overseas commercial property should be listed as non-standard assets, noting its greater illiquidity than UK commercial property. “If you look at these overseas hotel rooms, there is quite often less of a secondary market so they are a bit more difficult to dispose of,” said Mr Tilley.
Mr Tilley noted the rising popularity of commercial property in recent years. “The nice thing about commercial property is it is a tangible asset, you are holding it in your pension scheme, you see in the bank account that the rent is going in every quarter, you can see the value of your pension scheme going up and that has a lot of appeal to people who otherwise are looking at the virtual world of pensions.”
The Financial Services Authority published a paper last November, proposing an increase in the minimum capital threshold for self-invested personal pension providers from £5,000 to £20,000 and the addition of surcharges for any assets under management and the holding of non-standard assets.