Bank of Scotland mortgages launches new product

Bank of Scotland's Smartfinance has launched an offset commercial mortgage for the pension fund market, billed as the first of its kind in the UK.

According to Bank of Scotland, the new product is designed to enable 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, the ifaonline website reports.

Bob Stitt, business development executive, at Bank of Scotland Corporate, said: "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 Mr Stitt, the introduced option to offset at BoE base Rate (4.75 per cent) 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.

Mr Stitt added: "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."