Bank of Scotland's Smartfinance has launched an offset commercial mortgage for the pension fund market.
Claiming to be a UK first, the new product enables businesses to use the cash element of a small self-administered scheme (SSAS) or a self invested personal pension (SIPP) to offset against a commercial mortgage according to Bank of Scotland.
Bob Stitt, business development executive, at Bank of Scotland Corporate says: “Since launching smartfinance we have received excellent feedback from IFAs and those working in the financial services industry. For the first time they have been able to provide their clients with the option to fund their commercial property in an efficient way.
According to Stitt, the introduced option to offset at BoE base Rate (4.75%) against the cash element of a pension fund allows customers to pay interest on credit balances of the pension fund, while an equivalent amount lowers the interest charged on a Bank of Scotland commercial mortgage.
This potentially provides pension schemes with a chance of reducing their monthly repayment or cutting the repayment term.
Stitt adds: “With new pensions legislation being introduced in April 2006 to limit pension fund lending, there may be a case for taking advantage of current limits now.”IFAonline
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