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Sipps hope offered by Chancellor

30th March 2006 | back to article listings BACK    print this article PRINT

Those who have already invested in self invested personal pensions (Sipps) and had been concerned over the government's U-turn on the plans may have new reason for cheer.

Chancellor Gordon Brown, who dashed the hopes of thousands of Sipps investors in his pre-Budget report before Christmas, has now made another surprising move with regard to the schemes. Following that pre-Christmas U-turn, the chancellor now appears to have had another change of heart and has revealed that he is to let Sipp holders to invest directly in student halls of residence and indirectly in other residential property.

The news means that more people will be able to get into the commercial property market through a Sipp, something which appeared unlikely after the decision of the chancellor last year seemed to sound the end of the Sipps boom before it had even begun.

However, in Her Majesty's Revenue & Customs (HMRC) Guidance Notes, more information with regard to Sipps was revealed last week and the results suggest that there could yet be reason for Sipps holders to get excited about A-Day this April.

One of the main points was that, while Sipps cannot be used for investment in individual flats which happen to belong to students, they will be able to be invested in student halls of residence. This means that, as the UK's student population grows over the years to come, more people will be able to use their pensions to fund the development of communal halls for students.

This could be a potentially lucrative investment opportunity, particularly if the government's vision of seeing 50 per cent of school leavers entering into university education, as the number of buildings required to house these students will dramatically increase.

While Sipps cannot be invested into residential property in the way that had been envisaged before the chancellor's pre-Budget report, the HMRC guidance reveals that they can invest in residential property so long as it is via a "genuinely diverse commercial vehicle", or indirect investment. Such an approach includes real estate investment trusts (REITs), which were explained by Mr Brown during his Budget speech last week.

Therefore, it appears that there remain clear benefits to be gained from Sipps investments and these latest announcements may have been created to reduce the initial disappointment which arose following the chancellor's pre-Budget report with regard to the schemes.

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