UK Pensions Regulator victorious in Lehmans case settlement

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first_imgStephen Soper, interim chief executive of the regulator, said the settlement showed TPR would not hesitate to protect the PPF and members’ accrued benefits.“The estimated £184m settlement payment will be the largest sum paid to a scheme as a result of our actions so far,” he said.“This case demonstrates the regulator’s anti-avoidance powers can be used effectively, even in highly complex international insolvency situations.”The settlement of the case could set a precedent in UK insolvencies and situations where insolvencies occur outside of the UK but leave a DB scheme without a sponsor.In 2010, the regulator’s determinations panel ordered six Lehmans subsidiaries to make contributions towards its DB scheme via a Financial Support Direction (FSD).An FSD was also given to Canadian firm Nortel Networks, which then joined Lehmans to challenge the strength of the directives and TPR’s right to issue orders against insolvent companies.In December 2010, TPR won its rights against Nortel, and Lehmans’ European arm, and subsequently won again in the Court of Appeal – after both firms again challenged the decision.TPR was joined by the trustees of Lehmans’s UK DB scheme in challenging the appeals against the FSD.In July 2013, the Supreme Court further added to TPR’s claim by ruling that issued FSDs ranked as a provable debt in cases of insolvency, placing the claims alongside unsecured creditors.The case continued until an agreed settlement was reached on 18 August 2014, with the scheme to be wound up outside of the PPF and liabilities transferring to a third-party insurer.A PPF spokesman welcomed the decision, which avoided the reduction of benefits to scheme members and an additional burden on the lifeboat fund and its levy payers.“It means a potentially large liability will not be coming into the PPF,” he said.“This demonstrates the value of the regulator’s powers to protect member benefits and minimise calls on the PPF.”However, the £2.1bn claim against Nortel Networks regarding its underfunded scheme after the company’s 2009 bankruptcy remains ongoing, with legal challenges taking place in the US.In a report on the case, TPR said: “The parties to the regulatory action have now agreed the terms of a settled outcome, which results in certain companies in the Lehman Brothers group paying the trustees of the scheme an amount expected to buy out in full the scheme’s liabilities.”Peter Gamester, chairman of the trustees of the Lehman Brothers Pension Scheme, said the settlement was made possible by the underlying financial strength of the bank’s UK operations after its successful administration.He thanked the scheme members for their patience during the six-year legal proceedings following the bank’s collapse.“This patience has been rewarded by the commitment to provide funding to secure pension entitlements in full,” he said.The joint administrators of Lehman Brothers’ European arm also welcomed the settlement of the case.Tony Lomas of PwC said: “The conclusion of this significant pension scheme deficit issue is another milestone on the path to resolving the administration.“It benefits other creditors by securing significant contributions to the cost of the settlement from other Lehman Group companies and alleviates concerns for pension scheme members about the provision of their pension benefits.” The UK Pensions Regulator (TPR) has secured a settlement in its case against Lehman Brothers over funding the deficit left in its UK defined benefit (DB) scheme after insolvency.The settlement secures the full insurance buyout of the DB pension fund, which had a buyout basis deficit of £184m (€230m) at the end of June.The case, ongoing since 2008, began when the US bank filed for Chapter 11 protection, sending its operations across the globe into insolvency.The bank’s UK DB scheme was left in deficit with the regulator launching legal challenges against subsidiaries to keep the scheme from entering the Pension Protection Fund (PPF).last_img read more

​More rationality needed in sustainable investment debate, says Norges Bank

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first_imgHis comments come less than a week before a parliamentary group is set to recommend whether the fund should divest its coal and petroleum holdings.Slyngstad also explained why NBIM felt the need to allocate part of its research budget to responsible investment and sustainable finance.“We do this because we think there needs to be both a better set of data and more rationality around the whole discussion,” he said. “We need to go from just words to numbers.”The chief executive also said the 1% of the fund earmarked for environmental purposes, up from the initial 1% of the equity portfolio, surprised him due to the absence of renewable energy projects.“A lot of those investments are really more on the technology side,” he said, noting the importance of technology that facilitates energy saving.“The whole area of renewable energy is, of course, something we follow closely, but it is not that large of an [amount] of the fund today.“Renewable energy was, of course, the starting point, but energy storage has become more important, transportation, of course, is [in] there, waste and water management are very important as we go along, and even agriculture.”Slyngstad said the environmental portfolio, currently managed by seven external managers and consisting well over 150 companies, could have enjoyed “enormous enthusiasm” had it been very profitable.However, while NBIM outperformed environmental indices, it still underperformed the market as a whole over the past five years.Despite this, the last two years have been “very, very profitable”.The environmental mandate was doubled by the government in April, with consideration initially given to a standalone renewable energy mandate. Yngve Slyngstad, head of Norges Bank Investment Management, has called for more rationality in the sustainable investment debate, with data underpinning all decisions.The chief executive at NBIM, in charge of the NOK6trn (€699bn) Government Pension Fund Global, said the wish for better data to underpin investment decisions was one of the reasons the central bank’s asset management arm had allocated funding to research on responsible investment.Speaking at the Geneva Summit on Sustainable Finance, organised by the University of Geneva’s Institute for Environmental Sciences, Slyngstad outlined the sovereign fund’s approach to sustainable, long-term investing and how it factored into matters of engagement and ethics.He told delegates that it was for politicians to consider all matters of ethics, not NBIM, and said he stood by his comments from earlier in the year that coal was not a particularly profitable industry.last_img read more

Asset growth forces BpfBouw to scale back target real-estate allocation

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first_imgHowever, a 65% interest-risk hedge and an 80% currency hedge accounted for 15.5% of the overal return, with the latter generating a 4.1% loss.BpfBouw said the extension of its property allocation would come at the expense of its fixed income portfolio, which the scheme will reduce by 4 percentage points to 42%.The equity allocation will remain 27%.Van As said the pension fund planned to invest €500m in existing Dutch property, as well as redevelopments in attractive areas through its own property investor Bouwinvest.The scheme also expects to allocate €100m abroad through local partners.BpfBouw is planning to extend its investments in care property, with several projects in the “more expensive segment” in the pipeline.Van As said €300m had been committed for this purpose, as well as for the medium segment of the care market.Meanwhile, BpfBouw has reduced its strategic commodities allocation by 1 percentage point to 3% as the planned pace of expansion was overtaken by the assets’ increase.It added that the 4% target allocation for private equity and hedge funds had been scaled back for the same reason.Those asset classes returned 21.7% and 17.3%.By contrast, commodities delivered a 27.1% loss, due to falling oil and metal prices.BpfBouw’s property holdings returned 8.8%, while fixed income and equity returned 12.5% and 18.1%.Van As attributed the 34.4% and 19.3% returns on its opportunities and infrastructure portfolios mainly to the J-curve effect of these kind of assets.Separately, Bpfbouw said it has appointed two experts on asset management on its board, and that it would increase its control over implementation at its asset managers APG and BouwInvest.One of the results has been that the pension fund has withdrawn APG’s active mandate for its interest hedge. BpfBouw, the €54bn pension fund for the Dutch building sector, has scaled back its tactical real estate allocation by 1 percentage point to 16%. Director David van As said the pension fund wanted to “restrain” growth, as its real estate investments were “predominantly illiquid, in core areas and subject to tight restrictions”. He added that BpfBouw’s long-term target property allocation was 20%, including a 1% allocation to listed real estate in its equity portfolio.Last year, the industry-wide scheme returned 24.5%, according to its annual report.last_img read more

Nordic pension funds cautious on growth prospects for 2016

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first_imgThe Ericsson corporate pension fund in Sweden and Denmark’s Industriens Pension cautiously expect to see economic growth characterising 2016’s investment environment and are considering the role China might play next year.In an interview for IPE’s “On The Record” in the magazine’s December issue, Christer Franzén, CIO of Ericsson Pensionstiftelse in Sweden, said: “Our fundamental macro view is that 2016 will be a similar story to this year. Growth will be slow but positive.”European stocks could be expected to catch up with the US if investors believe the European Central Bank’s quantitative easing (QE) would continue to work, he said. “Emerging markets will continue to struggle, so we will not put too much faith in them,” said Franzén, who runs investment at the SEK18bn (€1.9bn) pension fund. Morten Kongshaug, portfolio manager at Denmark’s DKK134bn (€18bn) Industriens Pension, said his fund was – on a fine balance – working on the assumption there would be economic growth globally next year.The labour-market pension fund has two main scenarios for 2016.“The first, to which we attach a 65% probability, is expansion of global growth and global liquidity,” he told IPE.“In the risk scenario, with a 45% probability, the deflation we have experienced in various markets, including intermediate production, construction and commodities, will cause a recession.”Industriens’s portfolio is not defensive on the whole, he said, as it is still slightly overweight risk assets. “However, we are considering rotating our emerging market allocation to China,” he said. Meanwhile, Franzén looked to China as a deciding factor for the fate of markets in the both the US and Europe in 2016. “If China misses growth expectations, it might affect the US and EU stock markets negatively,” he said.Renato Bottani, meanwhile, CIO of Fondo Pensione IBM in Milan, told ‘On The Record’ his fund had finally opted to give its investment managers more freedom.“We have asked them to focus on a total-return target and to be completely independent from any benchmark,” he said.The managers will be free to pick their own allocation between equity and fixed income.“In equity, they will be free to decide which countries, sectors and companies they can invest in, provided the investments meet some ESG criteria,” Bottani told IPE.“In fixed income, we have given them freedom in terms of duration and allocation between sovereign and corporate.”last_img read more

Norway’s domestic sovereign fund recoups losses in Q2

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first_imgNorway’s Government Pension Fund Norway (GPFN), the smaller domestic counterpart to its giant former oil fund the Government Pension Fund Global (GPFG), reported a 0.4% investment return in the first half of the year, as a 2.7% profit in the second quarter more than erased the 2.2% loss suffered in the first quarter.Olaug Svarva, chief executive of Folketrygdfondet, which runs the fund, said: “After a challenging start to the year, with low oil prices and falling stock markets, the value of the Government Pension Fund Norway increased in the first half by 0.4% to NOK199.1bn (€21.4bn).”The GPFN invests 85% of assets in Norway and the rest elsewhere in the Nordic region, with a strategic allocation of 60% equities and 40% bonds.“We are very pleased to have delivered an excess return of 0.7 of a percentage point during this period, but is also prepared for periods of weaker numbers,” Svarva said. At the end of the second quarter, the markets had been characterised by Britain’s referendum on withdrawal from the EU, she said, and this had resulted in increased uncertainty and expectations of further monetary and fiscal stimulus internationally. “Bond yields fell to new lows, while the stock market has reversed the decline we saw at the beginning of the year,” she said.Seen on its own, the second quarter return of 2.7% beat the benchmark by 0.3 of a percentage point, Folketrygdfondet said in its interim report.The equities portfolio returned 3.6% in the second quarter, not quite making up for the 4.8% loss the assets made in the first quarter of the year and ending the first half with a 1.4% loss.Meanwhile, bonds returned 1.4% in the second quarter, after a 1.6% return in January to March 2016, adding up to a 3.0% return for the whole of the first half.In its report, Folketrygdfondet said the Norwegian stockmarket had risen 4.3% in the second quarter as measured by the Oslo Stock Exchange index, while the benchmark for Nordic equities showed that shares on other Nordic stock markets had fallen 2.0% in the same period.Norwegian equities’ performance was mixed, with the energy sector showing the strongest sector rise at 13.0% in the three-month period, while the materials sector was the weakest with an 8.3% drop, it sailast_img read more

Dutch industry-wide scheme opts for partial merger

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first_imgHowever, the parties involved didn’t want to delay the first step of a merger any longer, said Henk van der Kolk, chairman of Detailhandel.“Otherwise, the participants would have been in a pension fund without a future for many years,” he said.He added that the transfer “would offer benefits straight away, such as lower administration costs and improved labour mobility between the furnishing and retail sectors”.The existing scheme for the furnishing industry will close to new entrants and will assess the scenarios for its future, which include joining a general pension fund (APF) or an insurer, said Pieter Verhoog, trustee at Wonen.He explained that a transfer of pension rights to Detailhandel would have lead to a rights discount of 6% or 7% for the participants of Wonen, and was deemed irresponsible.He indicated that employers and unions would try to bridge the funding gap through deploying some of the savings resulting from the switch to Detailhandel. Rising interest rates would also help, he said.If the funding difference were to persist, Wonen could look at “technical solutions”, which would leave the funding advantage with the participants of Detailhandel, Verhoog added.He said this would be complicated and would require the co-operation of both pension funds.According to Verhoog, a rights discount for Wonen’s participants would be the very last option. In his opinion, a two- to three-year period would be needed to find an alternative for managing the existing pension rights.As of 1 January, the closed sector scheme will switch from Syntrus Achmea to TKP as its pensions provider, after Syntrus Achmea announced that it would cease its services for industry-wide pension funds last year. TKP also carries out the pensions administration for Detailhandel. The €3.7bn Dutch pension fund for the furnishing industry (Wonen) is to place its future pensions accrual with retail sector scheme Detailhandel, the pension funds and their social partners have agreed.The parties decided against a full merger as the difference in funding levels would have required a benefit cut of 6-7%. As a result, the pension fund for the furnishing sector will keep on managing its existing pension assets and liabilities for the time being.From 1 January 2018, the 30,000 active participants of Wonen will begin accruing new pensions at the €20bn Detailhandel scheme.The two pension funds have been trying to merge for years, but the difference in funding levels has remained insurmountable. Currently, the coverage ratio of Wonen is 104.5%, whereas coverage of the much larger Detailhandel stands at 111%.last_img read more

Impact assessment model finds ESG funds ‘low on sustainability’

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first_imgInvestment funds aren’t what they say they are when it comes to sustainability or environmental, social and governance (ESG) criteria, according to the company behind a new impact measurement model.The “portfolio impact footprint” tool – run by Impact-Cubed and originally for in-house use by hedge fund Auriel Equity Investors – has been endorsed by a number of European pension funds that helped test the model.An analysis of 25 ESG funds using the tool showed that “at a modest 11% of tracking error at most, the true measureable impact of a given ESG fund in a representative sample is far from what their messaging and positioning would imply”, Impact-Cubed said in a recent report.“From running well over 100 funds through the model since its launch we have found that funds with twice this percentage exist, and it is possible for sustainability to account for 30% to 50% more of an ESG fund’s tracking error,” it added.  The model also uncovered vast differences between ESG funds despite them being indistinguishable on the basis of their marketing.“The true measureable impact of a given ESG fund is far from what their messaging and positioning would imply”Impact-Cubed“Excluding the few worst examples, it seems there is a 10-fold difference between the best quartile versus worst quartile ESG funds in terms of impact,” said Impact-Cubed.In the worst case, a fund came out as having a negative impact, indicating the investor would have been better off investing in a tracker fund, it added.Asset owners’ tests Nadine Viel Lamare, head of sustainable value creation at AP1Sweden’s AP1 ran the model on a SEK20bn (€1.9bn) portfolio. Nadine Viel Lamare, head of sustainable value creation at the buffer fund, said Impact-Cubed’s initiative filled a gap in the market for assessing a fund’s alignment to the UN’s Sustainable Development Goals (SDGs).Other analysis tools only looked at companies’ revenue streams relative to the SDGs, she said, without assessing how well a company was managed or the negatives that came from producing a given product.“You don’t get a holistic view,” she told IPE. “That’s what I like about this tool – it’s a good attempt to take a holistic approach. There is so much focus on carbon footprinting right now and sustainability is about so much more than that.”center_img Magdalena Lönnroth, portfolio manager and head of responsible investmentThe €1.5bn Church Pension Fund of Finland also participated in the pilot project, submitting two emerging market equity and European equity mutual funds each for analysis.Magdalena Lönnroth, portfolio manager and head of responsible investment, said the results from Impact-Cubed’s analysis of its equity funds were “quite interesting”.“On the emerging market side we had two ESG managers, one of which didn’t really get that flattering a result,” she said.Lönnroth added that the Impact-Cubed analysis was for her the “first real connection” with getting the UN sustainable development goals into fund-level reporting.Impact-CubedImpact-Cubed was spun off as a separate company by Auriel Equity Investors last year and is in the process of seeking certification in the UK as a B-Corp, a designation for companies that use business to solve social and environmental problems.The tool is intended to measure – and report on – the impact of any portfolio of listed securities on sustainable development and the achievement of the UN Sustainable Development Goals (SDGs).More broadly, the company’s hope is that its service “helps separate ‘green advertising’ from ‘green investing’ and empowers investors with data to engage their fund managers”.“Most asset asset managers tout their ESG credentials loudly and market their specific product aggressively, which is understandable considering the explosion in ESG demand,” the company wrote in a paper about the model and a test of several ESG funds. “The ESG claims have been traditionally easy to make and impossible for a client to verify.” The model includes 14 impact measures or indicators, based around publicly available data. Indicators range from carbon and water efficiency to gender equality, board independence and tax, but also capture companies’ business models. Companies are assessed in terms of the environmental and social “good” or “harm” they do in relation to the SDGs, captured as a percentage of revenues from products and services.The 14 measures were developed with input from European and US investors.last_img read more

LCP: COVID-19 has limited impact on DB schemes’ funding levels

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first_imgSome 60% of sponsors had reported an accounting surplus in their pension scheme on an IAS19 (International Accounting Standard 19, Employee Benefits) accounting basis for 2019, rising to 70% in surplus – their best position for 20 years – by March this year.However, just one month later, that figure had fallen below 60% again as the pandemic hit.Moreover, the LCP analysis reveals that between 10 March and 18 March, debt-market volatility and rising interest rates wiped some £150bn (€167bn) from the total pension liabilities as investors sought shelter in fixed income.The development effectively balanced out Q1’s precipitous falls on global equity markets.The LCP study noted that two factors have served to shield FTSE 100 scheme sponsors from the worst effects of recent market turmoil.First, their combined asset holds are currently split 60/20 in favour of bonds over equities. This compares with the position in 2002 when just over 60% of fund assets were allocated to equities and less than 30% to bonds.Second, funds with extensive hedging strategies in place will have seen their liabilities reduced.Meanwhile, the key IAS 19 assumptions of discount rates, inflation and mortality, have also seen noteworthy developments.Since 31 December 2018, discount rates have fallen from around 2.8% to between 2% and 2.1% at 31 December 2019, which has had the knock-on effect, in isolation, of increasing scheme liabilities by around 15% – some £70bn for FTSE100 sponsors alone.InflationOn inflation, sponsors based their IAS 19 assumptions on a breakeven inflation assumption of some 3.2% less an inflation risk premium of between 0.2-0.3%.This risk premium is slightly higher than in previous years. The report’s authors suggest it could “be as a result of the increased uncertainty in the market and the perception that perhaps investors require additional returns if they were to hold inflationary risks in the current climate.”The report also noted that sponsors were beginning to adapt their IAS 19 assumptions to Retail Price Index inflation reform in the UK, which will eventually see the measure replaced with the CPIH measure.But, cautioned the report, the impact of that reform remains, however, uncertain.MortalityOn the third key assumption – mortality – the study revealed some disparity among sponsors over mortality assumptions.Although a clear majority in a sample of 45 samples had updated their mortality assumptions to take account of the latest developments in the CMI 2018, a significant minority relied on earlier iterations of the CMI dating back to 2013.The report disclosed that this introduced a level of subjectivity into the reporting that they value at some £50bn.The report focused on the DB net balance sheet position in the sponsor’s year-end financial statements. It did not take in the funding position, which represented a cash call on the sponsor.DividendsFinally, on the now contentious topic of dividend payments to shareholders, the report said that around one-third of FTSE 100 companies had either cancelled or deferred planned dividends.This move comes not just as a result of the COVID-19 outbreak but also in the face of growing pressure from the UK Pensions Regulator to strike an equitable balance between the interests of shareholders and pension scheme members.Most recently, the regulator had insisted that sponsors could only suspend or reduce deficit contributions if they halted dividend payments.LCP’s full report can be viewed here.To read the digital edition of IPE’s latest magazine click here. The coronavirus pandemic has so far had a limited impact on the net funding position of UK FTSE 100 defined benefit (DB) pension schemes, a new report from consultants Lane Clark & Peacock (LCP) has revealed.The study shows that the near total shutdown of the UK economy in response to the COVID-19 outbreak has left funds treading water to end March broadly in the same position as at the start of the year.LCP partner Jonathan Griffith said: “Before the economic earthquake of COVID-19, a large number of FTSE 100 pension schemes were in a relatively healthy position, with most reporting a surplus in their company accounts.“The pandemic has thrown all this up in the air as discount rates and asset values are impacted by the market volatility.”last_img read more

New boutique estate in Townsville’s south

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first_imgRenders of the new Railway Estate development.More from news01:21Buyer demand explodes in Townsville’s 2019 flood-affected suburbs12 Sep 202001:21‘Giant surge’ in new home sales lifts Townsville property market10 Sep 2020“We are always looking for new opportunities around Townsville whether it is government projects, remodels, large custom dream homes, or new land developments,” he said.“Because of the strength of the market within the 3km of the CBD, we prefer to focus our efforts on working within the area. “We recently remodelled an old Queenslander in South Townsville, taking the charm of the Queenslander style but updating it with modern design and technology. The result was beautiful and I looked for more opportunities to reinvigorate the area of Railway Estates along the same lines. “The market is certainly increasing in the area because of its great proximity to the CBD and New Stadium.” Renders of the new Railway Estate development.RAILWAY Cottages is the newest boutique estate offering a variety of highset, modern Queenslanders fusing the charm of the Railway Estates neighbourhood with the elegance of modern design. It’s within 2km of the Townsville CBD and the new stadium, schools, boat ramp, restaurants, and shops. Construction on the first homes started in June and 50 per cent of the lots have been sold.Ellis Developments CEO Stephen Ellis said Railway Cottages has been designed to maximise outdoor tropical living offering all the elements desired in a new home while not breaking the budget. Renders of the new Railway Estate development.Offering four truly unique floor plans to choose from, each house and land package is completely turnkey with a fixed price contract. No hidden costs or surprise invoices.The Railway Cottages home sit on 400 sqm of land, are elevated to make use of the area underneath the home and feature vaulted ceilings, bamboo wooden floors, and a stone bench tops.There are only four lots left still for sale and they are eligible for the $20,000 first homeowners grant.center_img ,last_img read more

1 in 5 first-time landlords are ‘accidental investors’

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first_img “Don’t worry about year-on-year changes. 4. Recruit a team of advisors to help MCG Quantity Surveyors MD Mike Mortlock survyed his clients and found 23% had lived in their investment property as their PPR.Brisbane couple Callum and Prudence Klaer found themselves owning an investment property without even planning to.They bought their unit in Woolloongabba in 2010 as first homeowners with the intention of living there long term. Mr Klaer lived there for 12 months with friends before he and Pru headed north for work opportunities and friends of theirs lived there while they were away.In 2014, they returned and planned to settle down in the unit, until 2016 when Pru fell pregnant. The couple then decided they wanted a back yard and put the unit on the market, only to find they couldn’t sell it after the normal marketing campaign.They decided to keep the unit after chatting with a bank and realising they qualified for an Interest Only loan.“We tried to sell, but the bank had valued it at $340,000 and we had it on the market at that price for about a year, but we had no offers, despite the mean price in the area being $450,000,” Ms Klaer said.“So, rather than lose money, we thought, we’d just wait for the market to improve, or keep it.” So, now they find themselves living in a PPR in Moorooka with an investment property in Woolloongabba, which they rent out for about $360 a week.“We have no trouble renting it out,” Ms Klaer said.“I like the idea of keeping it because it’s so close to the city and it would be good for our son when he grows up.” “I like to say to people, you can eat your lollies but you’ve got to have your veges first. “Buy a property for the long-term and don’t make kneejerk decisions — it’s expensive to get in and out of investment properties.” Prudence and Callum Klaer with son, Frederick, at their home in Moorooka. They’ve become ‘accidental property investors’. Image: AAP/Josh Woning.ONE in five first-time landlords may have fallen into the property investment game by accident.New data from a leading quantity surveyor has revealed more than 20 per cent of landlord clients have become property investors unintentionally — joining the nation’s 2.2 million of them.MCG Quantity Surveyors managing director Mike Mortlock said he had discovered a large number of his clients had become property investors simply because they had chosen not to sell their home when it was time to move on.“Many of these owners seem to have fallen into their first investment, rather thanmade a strategic decision to become a landlord,” Mr Mortlock said.“It’s a fairly stunning result given the broad perception of property investors as acalculated, high-earning cohort set to tactically snap up all the available real estate.” “Plan your exit strategy and what you’re trying to get to over whatever time frame.” “If you own a PPR in a market that has a high vacancy rate and minimal prospects for capital growth, it might not be the best decision to keep it,” Mr Mortlock said.“It might be worth selling it and buying in an area with better long-term growth potential.” One in five first-time landlords may have fallen into the property investment game by accident, new data shows.While preparing tax depreciation schedules, MCG asked his clients whether they hadpreviously occupied the property, and found 23 per cent had lived in their investmentproperty as their principal place of residence (PPR), with owners living in their former homefor four years and 11 months on average.Mr Mortlock said the time frame showed only a fraction of those investors werestrategic first homeowners who took advantage of stamp duty concessions or grantsby living in their properties for the minimum required period prior to moving out.“Such a group always planned on being investors, but they would be a very smallpercentage of those in our research, otherwise the average resided-in period wouldmuch be lower than five years,” he said.“We think it came down to people looking to upsize and realising they were in a position where they could hold on to their old property and upgrade as well.” 5. Be patient! It could be helpful to get a depreciation schedule at the point the PPR becomes an investment property.Mr Mortlock said he believed in holding on to property until retirement age if you could comfortably service the mortgage.“If you can convert your PPR into an investment, the more hotels you own on the Monopoly board, the better you are at the end of the game,” he said.More from newsParks and wildlife the new lust-haves post coronavirus15 hours agoNoosa’s best beachfront penthouse is about to hit the market15 hours agoThe rise of the accidental investor could also have broader political implications, according to Mr Mortlock.“Most of these landlords own just one property and are mum-and-dad style investorslooking to get a financial step up before retirement,” he said.“It’s this group who will be most impacted by any future changes to negative gearingand capital gains tax, or upward movements in interest rates.“In our experience, those with the largest property portfolios are the least likely tocare about negative gearing or tax changes because they tend to be positivelygeared.”According to the ATO, fewer than 20,000 Australians have an interest in six or moreinvestment properties.TOP FIVE TIPS FOR ACCIDENTAL PROPERTY INVESTORS1. Get a bank valuation If you are converting a PPR to an investment property, you should get a valuation done at the time the property becomes an investment to minimise capital gains, Mr Mortlock said. 3. Don’t keep your PPR as an investment property just for the sake of it (Source: Mike Mortlock, MCG Quantity Surveyors) “With changes to depreciation legislation, you won’t be able to claim plant and equipment items unless you purchased prior to the 9th of May, 2017, and rented it before the end of that financial year,” Mr Mortlock said.“But what hasn’t changed is building structure deductions.” 2. Get a depreciation schedule at the point the PPR becomes an investment property “Have a long-term plan,” Mr Mortlock said. “We too often see property investing as a bit of an afterthought,” Mr Mortlock said.last_img read more