This last 10 months has been difficult for everyone, one way or another, but for pension schemes with property it has been a particularly difficult time.

A lot of SIPP and SSAS clients have property in their pension schemes that is rented to their companies and the rent is set at ‘market rate’ by a RICS valuer, as prescribed by HMRC.

In the current Covid environment tenants that are unconnected have the advantage of being able to come to agreements with their landlord and their rent has either been suspended, reduced or waived. With connected tenants that is not quite as easy.

For some tenants, at the start of Covid pandemic, it was very obvious how their business was going to be affected – a pub, restaurant or shop – all of these had to close and had no chance of producing income in order to pay rent.

Everyone has tried to be as sympathetic as possible but it had to be pointed out to some connected clients, that just saying you cannot pay was not enough. It was important to know how the business was affected and also to confirm that they were not taking dividends from the company, if they are saying they cannot afford their rent.

In most cases, connected or unconnected, where no rent has been paid, the agreement has been that we are accumulating the outstanding rent and when we get back to normal – whatever that is – then we can discuss what level of rent can be paid and how, if possible, the outstanding rent can be paid. This can be set up under an agreement to be paid off and can be paid over a number of years.

Accountants letters can be provided to prove that the company has no funds to pay the rent, but this will probably mean they will not have funds going forward either.

At present we have told most clients who are connected that we cannot write off rent without evidence that their company cannot pay the rent. This will involve a cost which may be hard to meet at a time when they are struggling. We have suggested it might be best to wait to see what happens. A lot of businesses have been able to apply for loans and some of these funds can be used to pay rent.

With unconnected tenants most of our member trustees have tried to be helpful to the tenants and the worry is if their tenants' businesses fail then they might struggle to find a new tenant.

Those with mortgages have had to balance no rent but still having to pay the mortgage – thankfully most have had sufficient cash or other investments that can cover the payments while no rent is coming in.

Let’s hope that life goes back to some form of normal soon and businesses can get back up and running.

 Elaine is a director of DP Pensions, which provides management services for SIPPs and SSASs.  She has worked in financial services for over 30 years and held a number of senior roles in the self-administered pension sector. She was involved for many years with the Association of Pensioneer Trustees (APT), the SIPP Provider Group (SPG)  and the Association of Member-directed Pension Schemes (AMPs). 

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