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One Year On (a report by Jon Whitfield April 2006)

Although it is still ‘early days’, the purchase of 15 New Bridge Street by the Trust and occupation by 15NBS as its principle place of business continues to be a successful venture. The Chambers has grown in stature and reputation and has exceeded its financial targets. It is recognised as a leader in its field and is now listed in the Legal 500 after only one year! Despite the constant, unhelpful and frequently ill-judged attention of Government upon the criminal legal system 15NBS faces the future with confidence. The Trust has also had an excellent first year. The Group fund holds a comfortable sum whose growth will accelerate year on year. From a management and property perspective, the first year has gone well.

The Trust members have no intention of simply resting on their laurels now that the New Bridge Street investment is secured. Together with Wolanski & Co. they will look to new commercial and/or other ventures over the next years holding the opinion that diversity of assets is central to the provision of a stable and profitable investment and pension vehicle. To this end they will take regular advice upon further investments including partnership investments with other businesses or trusts.

An unresolved factor is the Government's inability to put SIPPs upon a settled footing. What is an acceptable investment and how it should be funded remains in doubt. When the Trust was set up the borrowing limit for a SIPP-purchase of commercial property was up to 75% of the property value or in other words up to 300% of the initial investment. If this is funded by a mortgage which is serviced by a tenant's rent, the potential for growth started at 300%. On top of this came any rise in property-value with time.

On April 6th 2006 HM Treasury reduced SIPP borrowing limits to 50% of the initial investment. At a stroke they reduced the profitability of any future investments by 250%. Thankfully even the current incumbents stopped short at backdating this drastic and detrimental change. The expected trade-off for this reduction namely the ability to invest in residential property, wine, art, antiques etc was also withdrawn when the Government imposed prohibitive financial conditions upon them. Somewhat confusingly they are called 'prohibited items'. In fact they are not illegal but tax-penalties have rendered them unprofitable.

The drastically diminished borrowing power and the prohibition upon hitherto permissible investments, reduces the profitability and flexibility of future SIPPs, two of the very reasons for their being so popular. It remains to be seen whether there will be another U-turn. It is certainly to be hoped that, having removed the trade-off for its diminution, the Government will relent and reintroduce the higher borrowing levels thereby returning SIPPs to their original profitable status.

Jon Whitfield
April 2006


Updated 05 April 2007
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