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Government to Consider Residential Inclusion for SIPPs and SSASs

By +Eric Jafari

Budget 2013Following the recent Budget, it's emerged that Ministers are to consult on whether pension investors could consider holding residential property in their retirement funds.

Treasury documents revealed the Government will explore with interested parties whether the conversion of unused space in commercial properties in high streets and town centres to residential use could be allowed within pension schemes.

Technically speaking, it is currently possible to hold residential property in a self-invested personal pension (SIPP) or small self-administered scheme (SSAS) but doing so will incur penal tax charges.  It's unlikely, therefore, that any pension scheme operator would sanction such a move.  However, under current legislation, commercial property held within a pension scheme is exempt from tax.

The ability to hold residential property, tax-free, within pension schemes was all set to go ahead some years ago.  But in a last minute change of heart in 2005, Gordon Brown scrapped it.  It left the pensions industry with a massive bill, having spent millions preparing itself for a flood of enquiries.

In retrospect, it was widely felt the decision to abandon the proposal was the right one.  In addition to concerns about significant property price inflation, many were worried that investors might misuse pension funds to purchase homes abroad.

Eight years on, the landscape is very different. Property prices are languishing, particularly in the commercial sector, with an ever-increasing number of empty properties falling into disrepair.  As a result, many formerly beautiful and historic locations throughout the UK are blighted with boarded up premises and rows of charity shops.

Rather than proposing all forms of residential property could be held within pension schemes, the focus of the consultation is limited.  The suggestion is that out-of-favour commercial property in high streets and town centres could be turned into residential units.

This initiative has a number of potential benefits.  It could reinvigorate towns and cities in line with recommendations cited in The Portas Review.  It could provide badly needed additional homes for rent.  And it could spark an upward movement in house prices, to kick-start the market.

Furthermore, it could provide new investment opportunities for pension schemes, at a time when stock market volatility and a seemingly endless string of banking scandals has caused many people to reduce or suspend their pension contributions.

Obviously, the legislation needs to be drafted carefully to avoid abuse.  But as the benefits could be significant, the consultation process is definitely welcomed.

Keen to add value to the debate by canvassing the opinions of the widest audience, SIPPclub has just launched a one month campaign.  Already responded are investors, property professionals, financial advisers, and SIPP and SSAS operators.  The results and analysis of the campaign will be presented to The Treasury and they will be made available to the public.

We support the consultation process.  To ensure the Government obtains the views of the largest number of people, we kindly ask you to give your opinion about this matter.

Click here to view the survey (a new window will open)

The campaign is being run and co-ordinated by SIPPclub

24 April 2013


SIPPs,SSAS,Residential Property,Pension Investment