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Investors warned about adequacy of commercial buildings cover

Updated: May 3

Investors in pension schemes are being warned of the knock-on effect of inadequate sums insured on commercial properties within their portfolios.

The Financial Times (FT) reported that some providers of self-invested personal pensions (Sipps) and small self-administered schemes (Ssas) were “dropping the ball” on the insurance of commercial property, leaving investors exposed.

The FT said questions around due diligence carried out by Sipps providers had been mounting amid recent court cases focusing on non-standard investments. Trevor Palmer, commercial development specialist at NFU Mutual, was reported as saying there were "many instances" where cover was inadequate, particularly among smaller Sipps providers.

"I frequently see Sipp and Ssas providers dropping the ball when it comes to the ongoing protection of the investment,” he told the FT.

"How providers address this varies considerably and their lack of knowledge in general insurance commercial property owners products could have a significant effect on the investment should an insurance fail in the event of a fire or other major disaster."

He warned that if commercial properties were not properly insured, this could lead to claims being declined and savers being without retirement savings.

Tobias Haynes, a solicitor at FS Legal, was quoted as saying: "The provider effectively owns the commercial property when it is put in a Sipp and as a result it is their responsibility to make sure there are adequate protections in place.

"The potential issue on that is that it does leave all sorts of problems for investors such as claims being refused if the policy is not suitable.”'s Trevor Smith, commented: “Our data reveals that only around one in 9 commercial properties are adequately insured and that 70% are underinsured.

“Commercial properties are increasingly forming part of pension portfolios and inaccurate sums insured represent a significant risk to investors, should a property be subject to a major loss. The message for me extends beyond Sipps and Ssas providers to include trustees of properties, executors, directors of right to manage companies and so on. Clearly, properties must be adequately insured to ensure fiduciary obligations are being met.”

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Read The Financial Times report: Advisers warned about Sipp provider property checks.


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