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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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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IMPORTANT NOTE: NOTHING FEATURED ON SIPPclub IS EITHER AN IMPLIED OR A SPECIFIC RECOMMENDATION TO MAKE, OR TO REFRAIN FROM MAKING A FINANCIAL DECISION.  THIS PAGE HAS NOT BEEN APPROVED AS A FINANCIAL PROMOTION.

As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk.  Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.

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