Residential Property In A SIPP? - The Decision

Residential Property In A SIPP? – The Decision
Fiji by Julian Cohen. Why?

Computer Says NO!

Despite overwhelming support in favour of allowing residential property in a SIPP, the Government has said NO. But it's not all doom and gloom as you'll see below.

High Streets Miss Out On A Financial Lifeline

Earlier this year, a consultation was undertaken as to whether pension schemes should be permitted to invest in residential property, by converting unused space in commercial properties.  A valuable outcome would be the invigoration of many of Britain’s dilapidated high streets.

There were many representations by a wide variety of relevant parties, including property groups, SIPP operators and financial advisers.  SIPPclub also carried out a survey entitled Residential Property In A SIPP which was submitted to the Treasury.

Having thoroughly reviewed all aspects of the proposal, HMRC has written to pension providers to inform them that it will not be changing the rules.  Holding residential property within a pension scheme will continue to attract a penal authorised payment charge.

A spokesman from HMRC said: ‘Our findings were that the benefits of changing the tax rules in this area, in terms of encouraging conversion of unused space in commercial properties in high streets and town centres to residential use, would be marginal at best.

The government’s conclusion was these benefits would not outweigh the costs of complicating the tax code and the risk of reduced tax take that would result from changes to the tax rules at a time when the government is looking to reduce the deficit.’

Fears Of A Property Bubble

There’s also another very good reason why there’s currently little appetite for the proposal.

Given the early successes of the Government’s Help To Buy scheme, which is expected to show considerably more interest early next year when the scheme is extended, it’s not surprising this decision has been taken.  There are already concerns that the amount of money being pumped into property-focused initiatives, such as the Funding For Lending scheme, might fuel a property bubble.  It’s feared that allowing residential property to be purchased with the billions invested in pensions could contribute massively to the bubble.

Your Pension CAN Profit From Residential Property Right Now

Although directly holding residential property within pension schemes remains a ‘no-no’, it’s possible for the money in your pension to benefit indirectly from residential property.  Rather than holding ‘real property’ within your fund, you can invest your money in the shares of companies that carry out residential property work.  Or you can lend your money in a variety of ways to companies and experienced property professionals who are involved in the residential property sector. 

Detailed information on a variety of ways to profit from residential property using your pension is available to members of SIPPclub.  You could get involved in 'hands-on' property investment in the Lend area.  And 'hands-off' property investment in the Invest area.

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