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Chancellor Bans Sipps from Investing in Residential Property

5th December 2005 | back to article listings BACK    print this article PRINT

Of great interest to SIPP & SSAS pensions and property investors is the quite remarkable about turn this afternoon performed by the Chancellor with regard to residential property no longer attracting tax advantages when the new pensions simplification changes come in next year in April. That means no buy to let property, residential property of any kind including overseas holiday homes in Spain, France, Bulgaria or anywhere else for that matter will attract tax relief, which pretty much means the same as a ban.

The Chancellor has confirmed that people using SIPPs and other self-directed pensions will be prohibited from obtaining tax advantages when investing in residential property.  Significantly it has been pointed out by the Chancellor that there is no change of heart over investors investing in residential property via property investment funds such as those announced a few days ago by Assetz. (http://www.assetz.co.uk/funds)

 

Stuart Law, Managing director of Assetz Plc, comments,

 

“It is very interesting that the Chancellor has decided to act against people receiving tax relief the buying residential property in their pensions.  The majority of phone calls we were receiving related to holiday home purchases and whilst many of these had an element of investment about them it was clear that the suitability of the use as a pension asset to give income in retirement was questionable. Instead, as we saw some kind of restriction coming, we decided to set up a series of property unit trusts that emulate the returns of direct property investment but via a fully managed fund. As the property in our funds is not intended for the use of the investor we believe this fully complies with the Chancellor's wishes in this adjustment to the forthcoming legislation next year.”

 

“The Chancellor clearly remains committed to allowing residential property, both in the UK and overseas, as investments within an investor's pension savings plan, provided this is done on a genuinely diverse basis through vehicles such as the Assetz property unit trusts.”

 

It is clearly terrible news for much of the property industry as they were planning on direct sales of property to investors and their SIPPs which is now a soon to be forgotten dream. Assetz applauds the change of heart as managed funds offer better lending and gearing and hence the potential for better performance in the long term. They also offer better diversity and prevent investors diluting the investment returns by using their property investments in the SIPP and reducing returns.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/2366.html. Alternatively, please see our full press release archive.

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