Life & Culture

Preparing for your pension

Make those savings work hard


The problem with working in pensions is almost everyone has one. At parties you will be avoided by half the room and the other half will form an orderly queue. The most common questions revolve around commercial property purchases in pensions, which is a well-trodden path and you would expect all pension providers to follow the same formula — but do they?

Providers vary on cost, service, flexibility and the control of the member, so the choice of provider can have a big impact on what you can do and how much it will cost — key when you are trying to make the most of your savings.

Being able to choose your own solicitor to act for you, have your own choice of surveyor when needed and the ability to self-manage the property not only saves on cost but allows you to manage the property as you would your own investments. Even if it is as simple as picking the local handyman to do repairs without getting three quotations.

Joint ownership of property is permitted, so the member can own 50 per cent of a property and the pension scheme the remainder. This allows you to make the most of pension savings, even if the chosen property is more than is available in your pension scheme. However, it is worth knowing the provider’s stance.

Pensions can also borrow to invest and again provider rules vary. Tom Frank of Ice Cubed Finance, which specialises in commercial and pension finance, says: “Whole-of-the-market access can save significant costs over the term of the mortgage — even a one per cent saving on interest rate can save £25,000 on a ten-year, £400,000 mortgage — and non-mainstream finance should be an option for development”. Cost is, of course, critical when looking for the highest return. The direct costs include basic administration, purchase, sale and lease fees, transaction fees simply for receiving rent or paying expenses and charges for borrowing. Time-cost fees, however, are an unknown and can quickly add up, so knowing what you will pay at outset and on an annual basis allows you to keep costs under control.

Indirect fees, such as provider imposed management charges, can be as high as ten per cent of rent. This can be significant cost, for instance £3,000 per annum for a £30,000 per annum rent roll, even when the property is self-managed.

The final, yet most potentially most important, strand is service. Once you have the flexibility, control and have kept a lid on costs, it is all for nothing if for every interaction you have with the provider takes an age to receive a reply. Surely you should expect a 24-hour turnaround time when you are paying fees?

Doing your homework with your financial adviser is key. Pensions are long-term investments, so should you really tolerate high fees and poor service for the next 30 years?

Hopefully your research will pay off and you can tick all the boxes that suit you. If you see me at a party, you can join the half of the room avoiding the “pensions guy”.


Patrick Day is chairman at Day Cooper Day,, which specialises in small self-administered pension schemes (SSASs).
Sonia Day is managing director,


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