The world of pensions will be transformed by the launch of the Inland Revenue's simplified pensions regime in April 2006. A huge volume of legislation and regulation will be replaced by a single set of tax rules for all tax-privileged pension arrangements, from large occupational schemes to individual stakeholder pensions. The reform has been widely welcomed, even if it is now not looking as simple as it did when the proposals emerged over two years ago.

However, there is one area where the new rules will be less advantageous than today's regime: loans for commercial property purchase. Under the current regulations, if you have a self-invested personal pension (SIPP), it can borrow 75% of the purchase price of a commercial property. Thus if your SIPP is worth £150,000, in theory it could buy a property worth £600,000 (ignoring expenses). 'Gearing up' in this way can be very attractive, because in most cases the interest on the loan should be covered by the rent.

Remember, it could ultimately be difficult to sell a property to generate pension benefits in retirement and the tax regime could change again. It is not generally possible to take benefits from a pension scheme before age 50 (or age 55 from 6 April 2010), and there are restrictions on how you can take the benefits.

Under the future rules from 6 April 2006, the picture will be very different. The maximum loan will be 50% of the net value of your SIPP. For example, if your SIPP is worth £150,000, it could only buy property valued at £225,000 (again ignoring expenses). That is less than 40% of what the current rules permit.

It is fair to point out that the new rules will permit much greater contributions to be made to the SIPP, but it could still take at least a couple of years for your SIPP to grow to the £400,000 needed to support a £600,000 purchase.

If you are thinking of buying commercial property in a SIPP, the message is clear: you probably should not wait for the new rules to arrive. In fact, it may be that the sooner you act, the better because:

• If you are going to transfer funds from other pension arrangements to build up your SIPP fund, that will take time;
  
  

• In today's tight commercial property market, finding the right purchase may not be quick. You do not want to be negotiating a price with a 5 April deadline looming; and
  
  

• Commercial property purchase is not something that can be undertaken overnight: your SIPP provider and mortgage lender will insist on adequate surveys, probably including a contaminated land survey.

The best news about the new regime and property purchase is that schemes will generally be allowed to buy property from connected persons — eg the scheme members. That is not allowed under the current rules.

Note: Small Self-Administered Schemes
The current rules for borrowing by small self-administered schemes (SSASs) are different from SIPPs. The greater the contributions relative to fund size, the more the future simplified borrowing rule will bite. So the advice is generally the same: don't delay.