Latest news about sipps

Check out your SIPP broker's credentials

2005-10-24T07:46:00.000Z

Poachers have to be nimbler on their toes than gamekeepers or they simply don't get to eat. So we should not be surprised to see the racier financial advisers exploiting new pension rules in ways the Treasury never expected.

When Gordon Brown announced proposals for the simplification of the taxation of pensions, it is inconceivable he intended to knock 40pc off the price of holiday homes for high earners.

Similarly, it is hard to imagine that Mr Brown or the Treasury envisaged using taxpayers' funds to provide big discounts on yachts, fine wine and almost any legal asset bought within a self invested personal pension (Sipp). But these are indeed among the effects of the rule changes, as Your Money has been pointing out for the last year or so.

What really is surprising, though, is that the Treasury should have failed to bring Sipps within the remit of the Financial Services Authority before it inadvertently turned an esoteric form of pension into a multi-billion pound free-for-all. At present, there is nothing to stop double glazing salesmen - or indeed journalists - from turning their hand to promoting property-based Sipps.

No wonder traditional pension providers began to sound the alarm - as Norwich Union did this week, when The Daily Telegraph predicted yesterday's about-turn by the Treasury. It will review the regulation of Sipps, it said rather begrudgingly, insisting it still cannot understand what all the fuss is about.

This merely demonstrates how out of touch with the real world these mandarins are. The British love affair with bricks and mortar will be spurred to new heights of passion by the prospect of 40pc tax relief. If there were any doubt about that, it was dispelled by the £1billion inflow into Standard Life's Sipp since the start of this year.

However, there are substantial tax and administrative cost implications with owning property in a pension - and there are punitive "scheme sanction charges" for yachts and classic cars, which are deemed to be "wasting assets". Unauthorised advisers can hardly be expected to point out these disadvantages.

So it is a pity that the Treasury about-turn is unlikely to result in regulation before April, 2007, or a year after the new rules take effect. The regulators really must pedal faster to try to catch up with the racier advisers. Until then, the rule for investors remains: "Caveat emptor or buyer beware".

SIPP's might boost Bulgaria's holiday homes

2005-10-17T09:29:00.000Z

BULGARIA appears set for a boost from changes to UK pension rules.

In the small ski resort town of Bansko – billed as “the best-kept secret in Bulgaria” – real-estate experts are closely following coming changes to UK pension rules, the International Herald Tribune said on October 7.

“Potentially it could explode the market,” the newspaper quoted Clive Ireland, corporate director of MacAnthony Realty International, which opened an office in Bansko in September.

Under the pending rules, UK pensioners will, for the first time, be allowed to use money in a self-invested personal pension fund (SIPP) to buy residential property, including second homes and investment property in other countries.

Bulgaria has a favourable exchange rate, which already is helping to attract more UK visitors. According to Bulgarian national statistics, the number of UK tourists jumped to 259 000 in 2004, a 63 per cent increase over the previous year.

In Bansko, tucked in the mountains in southwest Bulgaria, a furnished, 107 sq m three-bedroom apartment with a mountain view in a new development is sold for about 127 000 pounds, a small studio for as little as 46 000 pounds.

Ninety-five per cent of MacAnthony’s UK clients in Bulgaria are investors, Ireland said, enticed, in some cases, by guaranteed rental returns of 6.5 per cent a year for three years.

With the help of the new pension rules, a UK buyer in Bansko could reap UK tax benefits at the purchase and then sell the property without paying tax on the profit, thanks to Bulgaria’s “lenient” tax laws.

The recently held exhibition A Place in the Sun Live in London confirmed that Bulgaria continued to be the cheapest option for Britons looking to buy a second home abroad.

At the London exhibition, Bulgaria emerged as the only affordable option for retail investors in the market for mountain resort properties. On the segment for coastal homes, however, popular destinations like Spain and Cyprus and maturing markets like Turkey and Croatia provide stiff competition.

The Bulgarian properties showcased at the exhibition had little or no competition price-wise with one-bedroom apartments and studio apartments in both seaside and mountain locations asking just 30 000 to 80 000 euro. Turkey was the only other destination with some pricing power, but Bulgaria’s neighbour has the huge liability of the administrative hassle related to land purchases.

The capability of the tourism sector to further support the interest towards investing in Bulgarian property will also be checked in the period of October 21 by October 23 when this autumn’s Real Estate Expo will be held in Sofia. More than 100 leading property developers and real-estate agents will take part in the largest trade show in this sector on the Balkans.

FSA could regulate the SIPP Market

2005-09-30T13:49:00.000Z

The City watchdog could take over regulation of certain personal pension schemes under moves being considered by the government, it emerged today.
The Treasury plans to issue a consultation on whether self-invested personal pensions (Sipps) should be brought under the remit of the Financial Services Authority (FSA).

The rules governing Sipps, which are currently unregulated, are due to change in April next year, enabling their holders to put money into a wide range of investments, from residential property to fine wine and antiques.

Use a SIPP to get your dream holiday house

2005-09-30T13:44:00.000Z

THE grey world of pensions is about to get more colourful when the Government introduces a property-based pension that - for the first time - allows savers to invest in property tax-free to provide for their retirement.

Rather than buy stocks and shares with their pension cash, investors will be allowed to buy residential properties instead.

And as with traditional pensions, the Government will both contribute to your fund (and give you 22p for every 78p you invest, more if you are in the 40% income tax bracket) plus offer tax relief on any profits (capital or rental income) that your fund makes from a property.

Any house you buy in the UK can be purchased using your pension, but adding a more exotic place in the sun to your investment fund is problematic.

According to accountants PriceWaterhouseCooper, the number of countries that allow British investors to buy a property through a Self Invested Personal Pension (SIPP) are limited to three: Cyprus, Malta and Mauritius. That's because only these islands, which used to be British colonies and have legal systems similar to ours, allow properties to be owned indirectly as investments or 'unit trusts'.

Few people realise the difference this could make. When property-based SIPPs are introduced in April next year, it is said they will pull in billions of pounds into the property markets of these islands.

'Existing SIPPs are worth around £20bn, but we expect this to increase substantially to £80bn when property-based funds are introduced next April - and a substantial portion of this will be invested in foreign properties,' says Lyn Webster of investment specialist O'Garra.

Of the three countries, the most likely to benefit from this possible investment bonanza will be Cyprus, which is one of the most popular places to buy a home in the sun after Spain and the US, and the most tax-friendly destination to buy a property through a self-invested pension. That's because any rental income you earn from your property investment is not taxed at source.

Cyprus is already booming, so this extra cash pouring in is likely to make it the new Majorca and transform it from the relatively affordable middle-market holiday home destination it is today into a property hotspot.

Prices are already rising by more than 15% a year in areas such as Paphos and Limassol.

Gear your SIPP investments

2005-09-30T13:40:00.000Z

Investors in the Arc Sipp are to be offered an automatic gearing facility that uses holdings in the group's European Property Oeic as collateral to be reinvested in the fund.

The fund itself is able to gear as well but this is restricted to 10% of assets.

The facility is to be launched in April 2006 when pension rules change to allow gearing on any assets within a Sipp.

Charges on the Sipp, which is a white-labelled product from Pensions Associates Limited, include a set-up charge of £200 plus VAT and an annual fee of £300 plus VAT.

Managers of the property fund claim to have so far received commitments of £4.15m and expect it to top £50m within the next 12 months.

The fund, which was launched in June, has not yet made a property purchase. But once running it will be differentiated from the mass of property offerings which primarily target revenue from rental.

The Arc offering will be a trading fund that will buy and sell residential properties primarily in Spain although the fund has powers to make purchases across the whole of the EU plus Turkey and Croatia.

Therefore, the product will retain a cash holding of 20% for liquidity and investors will be able to exit on the first and third Tuesdays of every month. The minimum investment is £5,000.

Intro

2005-09-26T20:37:00.000Z

We aim to follow all the high street lenders offerings in conection with the new Sipp pension that Gordon is introducing in April.

As soon as we get the sipp specific information we aim to publish it here,please bear with us there is a lot of talk at the moment and not enough concrete info.

Sipp investment

2005-09-18T10:39:00.000Z

MUCH hype has surrounded the ability to hold residential property in pensions come next year. But will it be all it has been cracked up to be?

Under widespread changes to UK pension regulations on 6 April, known as A-Day, the government will relax restrictions on the types of assets investors can hold in a self-invested personal pension (SIPP). You will now be able to hold in a SIPP residential property, as well as direct private equity investment, unquoted hedge funds, classic cars, fine wine and art.

The in-coming changes have aroused the interest of scores of investors - many of whom were badly burnt in the 2000-3 bear market, but have seen the value of their homes soar.

"With the 'pension timebomb' issue looming large in many people's mind, the SIPP is becoming an increasingly attractive alternative to the personal pension," says Alan Fergusson, director of employee benefits at Kudos in Aberdeen. "Changes to regulations will make the SIPP an even more flexible solution."

While traditional personal pensions or stakeholder plans often allow retirement savers to invest only in providers' own funds or a limited set of funds run by other managers, SIPPs are pension wrappers within which you can hold a wide range of investments - from individual UK shares, unit trusts and investment trusts to multi-manager funds, unit-linked funds and commercial property.

The expansion of that range will give savers greater choice. As well as the increased flexibility afforded by SIPPs, contributions are tax-free. SIPP investments grow free of capital gains and income tax and there can be significant inheritance tax benefits too.

Angus Kerr, a fund manager at Aberdeen Asset Management, believes many people should be considering starting a SIPP ahead of A-Day, when you will be able to pay 100 per cent of earnings into your pension (subject to a maximum Â£215,000) and there will be no need to buy an annuity at 75.

"With the introduction of the pensions cap in the late eighties, many people, particularly those who had moved jobs more than once, found that they were severely under-provided for," says Kerr.

"This, combined with the poor performance of with-profit funds culminating in the Equitable Life debacle, led to an increased interest in SIPPs.

"In preparation for SIPP A-Day, those with defined contribution schemes in several pots should seriously consider sweeping them into a SIPP, where they can control the provision entitlement."

Setting up a SIPP is not difficult. The tricky bit is deciding how to invest the SIPP plan. So, what of holding residential property, either in the UK or overseas, in your pension?

First, let's look at putting your own home in your fund - a possibility come A-Day when a rule on transacting with "connected parties" disappears.

Transferring your principal private residence into your SIPP pension fund will, for many, be a bad move, warns Darrel Poletyllo, author of The Scotman's pensions simplification guide.

Owning your main home directly entitles you to 100 per cent of any gain upon sale free of tax. But, put it in your pension scheme, and the ownership transfers to the scheme trustees. Now, you will only be able to take 25 per cent of your SIPP fund tax-free, with the balance as taxed income.

However, with an incredibly favourable tax environment - especially for higher-rate tax-payers - the changes might prove a boon for buy-to-let investors and those with second homes.

As property purchases will be set against income tax, a 40 per cent taxpayer will effectively only pay Â£120,000 for a Â£200,000 property. Those who pay basic-rate tax at 22 per cent will pay Â£156,000. If the property is let, the rental income will be free of income tax. When sold, profits will be free of capital gains tax (CGT).

Factor in an annual rental yield of 4.2 per cent and capital growth of 3 per cent per year over ten years, and the total gain for SIPP holding a Â£200,000 property through a pension fund is a huge 127 per cent, against just 47 per cent for the same property held directly.

Says John Lawson, marketing technical manager at Standard Life: "For buy-to-let investors saving up for their retirement, it's really a no-brainer."

But, anyone interested in transferring a property they already own will have to do so at full market value - and will be liable to CGT.

Aware of this, savvy pension savers have stockpiled an estimated Â£11 billion, ready to invest into the buy-to-let market after 6 April. Nationwide subsidiary UCB Home Loans believes the new SIPP rules will boost the market by 15 per cent, while the Property Investor Show anticipates more than Â£6.5bn will go into properties held in SIPP pensions in the year after A-Day.

Some 65 per cent of buy-to-let mortgage brokers believe the changes will lead to an average 11 per cent uplift in business, according to Mortgage Trust's September forecast. But a hesitant 35.3 per cent think the potential effect on the market has been over-exaggerated.

As pension trustees will only be able to borrow 50 per cent of the value of a scheme's assets to buy a property - instead of 75 per cent of the property value at present - the majority of investors are unlikely to be able to participate.

To buy a Â£400,000 property, a scheme could borrow up to Â£300,000 on 5 April, meaning the fund size need only be Â£100,000. But, just one day later, the same fund would only be able to borrow Â£50,000, making the most expensive property that can be bought worth just Â£150,000.

"As usual, what the Treasury gives with one hand, it pickpockets with the other," says Matthew Robbins, an adviser at Haines Watts in Edinburgh. Then, there are concerns that the buy-to-let market has become saturated.

According to the latest figures from the Council of Mortgage Lenders, the market is slowing. Will you be able to rent the property out? Will your fund be able to cope with void periods, still meeting mortgage payments and other expenses?

And you should avoid having an over-concentration in bricks and mortar. With a well-diversified SIPP portfolio usually having around 20 per cent or less in property, is your pension fund large enough?

What about the lack of liquidity? If most of your scheme assets are tied up in property, will be able to secure the required income without having to sell up? And are you able to forgo the rental income and potential capital gains in the long-term? Until you are 55? Even then, you will only be able to take 25 per cent of your fund in tax-free cash.

The message is clear: do your homework before jumping on this SIPP bandwagon.

Abbey climbs in with Sipp product

2005-09-15T08:52:00.000Z

Some financial advisers are predicting investors will pour billions of pounds into residential property through their self-invested personal pensions (Sipps) when this becomes possible for the first time next April.

The change in the law effectively gives you a tax break to buy residential property, although borrowing is restricted to 50 per cent of your pension pot.

But putting a residential property in a Sipp may be inappropriate for a large number of people; given current high prices for property, investors with modest pension funds may find putting just one property in their pension gives them a disproportionate exposure to this asset class.

As a result, financial groups are likely to come up with imaginative ways to allow property investment on a smaller scale.

One of the first off the starting blocks is Abbey, the bank, which with Knight Frank, the property agents, has devised an intriguing new product. The Abbey Residential Property Plan is a derivative based on the Halifax house price index which gives people exposure to the property market without requiring a direct investment in property.

The fund is not entirely new. Abbey has launched a similar product before through a partnership with Newcastle Building Society. But this was a deposit structure, while the new â€œplanâ€� involves the purchase of shares in a Dublin-listed company. This gives investors tax advantages whereby they pay capital gains tax at the end of 10 years rather than income tax.

Under the new scheme, investors must put in a minimum of Â£3,000 and must remain invested for 10 years during which time they receive no income. At the end of the period Abbey pays out the original investment plus double the growth in the Halifax index during the period. If house prices fall over this period, the plan is designed to provide full repayment of the original investment.

The product has the advantage over buy-to-let in that it makes residential property accessible to those with more modest sums to invest. It also avoids the hassles of dealing with nightmare tenants, maintenance problems and all the usual hurdles of being a landlord.

The new fund promises double the returns of the Halifax house price index. Yet buy-to-let investors are also likely to make more than the index given that they tend to borrow a large amount of debt, giving a geared return.

In addition, investors in the Abbey product will miss out on the rental yields which an owner of bricks and mortar could expect to receive â€“ still about 5 per cent gross, or 3.5 per cent after costs.

Under one model of the Abbey product, if Â£10,000 had been invested 10 years ago, the payout at maturity would have been Â£43,400, because the Halifax index grew 167 per cent.

This is certainly not a return to be sniffed at. Yet imagine your Â£10,000 had been invested in a Â£100,000 apartment in 1995, after borrowing Â£90,000. If the property appreciated in line with the market, it would now be worth Â£267,000. Assuming the Â£3,500 of rental income is used to service the debt (a conservative assumption given that until recently, UK rents tended to cover mortgage repayments with room to spare), the buy-to-let investor would have turned Â£10,000 into Â£177,000 (the new value of the house minus the debt). This is clearly a superior return to the Abbey product, but given the gearing, entails significantly more risk.

However, such modelling may be irrelevant given that 1995 to 2005 was an exceptional period for the UK housing market. Looking ahead, it would be an optimistic â€“ perhaps foolhardy â€“ commentator who predicted similar growth.

Yet Liam Bailey, head of residential research at Knight Frank, is optimistic that prices will continue to rise in the medium term. Constraints on supply in the UK make a substantial fall in prices unlikely, he argues.

Mike Brown, head of retail business development at Abbey, argues that the product has advantages over other forms of property investment. Shares in property companies fluctuate depending on stock market sentiment, property unit trusts are often open only to institutional investors or high-net worth individuals and property syndicates are vulnerable to disagreements and strife, he argues.

But it is rather ironic that the Abbey product is being targeted at Sipp investors ahead of next Aprilâ€™s change in the law. Because it is a financial product, it does not constitute a direct investment in â€œresidential propertyâ€�. It could therefore have been bought by pension investors ahead of next yearâ€™s changes to pension rules.

In effect, â€œA-Dayâ€� has not given Knight Frank and Abbey a market opportunity so much as a marketing opportunity.

Sipp info from FT

Treasury considers Sipps regulation

2005-09-07T10:15:00.000Z

The Treasury is releasing a consultation paper at the end of September examining whether there is further need to regulate the pensions industry and which could see the FSA regulating self-invested personal pensions.

In particular, the consultation document will be seeking views on eligibility rules for establishing a tax privilege scheme and opening the market up to more companies.

Sue Monk, a spokeswoman for the Treasury, says the consultation paper will be looking at the entire pensions industry and whether there is a need for further regulation.

One possible option being offered in the consultation paper is a new Financial Services Authority (FSA) regulated activity of establishing and operating a pension scheme, which would bring Sipps and occupational pensions under FSA regulation.

Francis Moore, managing director of European Pensions Management and secretary of the Sipp Provider Group (SPG), says his understanding is there are two strands to the Treasury consultation which has yet to ben released.

Moore says: â€œIt is our current understanding that the Treasury intends to consult on widening the range of firms authorised to establish personal pension schemes with those authorised firms able to add a new permitted activity from April 2006.

â€œFrom April 2007, we understand the Treasury will be requiring all those who operate personal pension schemes to be authorised as part of general pensions schemes regulation. However, we are at an early stage and detail will be fleshed out in the forthcoming Treasury consultation and in our discussions with the FSA and HM Revenue & Customs.â€�

Andy Taylor, individual pensions marketing manager at Scottish Life, says: â€œScottish Life would welcome the regulation of sipps. Historically, sipps have been a niche product sold to high-net-worth individuals who have had access to investment advice. Post A-Day, we see sipps as a more mainstream or mass market product. We therefore see the regulation of sipps as being a sensible step which will bring them onto a level playing field with other mass market products.â€�

But Moore adds: â€œI would not be in favour of a situation where we get partial regulation because a lot of sipps are already regulated through what they invest in and the fact IFAs are already regulated to give investment advice.

â€œThe other thing we want to avoid is segmented regulation whereby sipps are regulated but not the rest of the pensions industry because effectively this will lead to scheme that are constructed in a slightly different way but will on the whole look and feel exactly like a Sipp.â€�

Last month, the SPG called for a level-playing field in relation to regulation of Registered Pension Schemes post A Day. Most investments of Sipps, it says, are held with regulated entities such as banks, investment managers, and stockbrokers already the exception being commercial property

Info from IFAonline

Sipp guidance document

2005-08-17T08:48:00.000Z

With an major in crease expected in the Sipp market following changes to the pensions regime through the implementation of A-Day in April next year, Legal & General has published a new guide for financial advisers.

The profile document provides a â€˜back to basicâ€™ guide on Self Invested Pension Plans (Sipps), outlining its historical background, along with assessments of the current Sipp rules and what will be allowed following A-Day, from tax advantages, to property investment both home and abroad.

L&Gcautions however, the industries current wait on further guidance notes from HM Revenue and Customs, with various details still under consultation.

Head of pensions technical services at the pensions firm Colin Batchelor says the latest Pensions Profile offering comes on the back of the increasing popularity of Sipps.

He says: â€œStarting with a comparison of current and post A-day rules, the guide covers all aspects of Sipps including a background and brief history, the mechanics of Sipps, property investment and borrowing.â€�

The Sipp guide is available on the L&G website and follows an announcement made last month by the firm to offer a deferred Sipp.

Alliance & Leicester enter's the SIPP Market

2005-08-11T11:11:00.000Z

Industry opinion is mixed on how significant SIPPs will be to the buy-to-let market. Estimates vary on the value of buy-to-let properties going into a SIPP. On the one hand, UCB Home Loans believes that between GBP3 billion and GBP5 billion next year will be invested in buy-to-let properties, of which a third will be funded through mortgages. This could result in a 15% rise in the number of buy-to-let purchases. Self-employed consumers could especially benefit from the opportunity to invest via a SIPP, as they need to undertake their own pension arrangements in the absence of a company scheme.

However, a number of industry figures have suggested that the hype around SIPPs boosting the buy-to-let market is unfounded and the rule changes will have little effect. There are high administrative costs associated with setting up and then maintaining a SIPP. Advisors have voiced their previous frustration in the lack of buy-to-let portfolio holders who have set up their own limited company. There are significant tax advantages to be gained from doing this, but the hassle has often put investors off, and some think the same will apply to the setting up of a SIPP.

It is questionable whether Alliance & Leicester will be able to take advantage of current professional buy-to-let investors. While tax savings are available for new buy-to-let investments, transferring an existing buy-to-let investment into a SIPP will result in capital gains tax on any profit gained, and the pension fund will be liable for stamp duty on the purchase.

Another reason for which current buy-to-let investors may be put off is because when a property is transferred into a SIPP, it is no longer owned by the individual, but by the trustees of the pension fund. It is likely that when the trustees wish to carry out maintenance on a property they will use contractors. This takes away the hands-on nature of a buy-to-let property, which has been one of its major attractions. Taken in this context, it would make sense for Alliance & Leicester to proceed with caution.

Info from www.banking-business-review.com

Gordon's new SIPP rules

2005-08-10T08:48:00.000Z

The confirmation of borrowing rules on Sipps post A-Day by the Revenue & Customs (HMRC) have been described as â€˜toughâ€™ and â€˜penal,â€™ by the industry.

Sipp specialist A J Bell, has attacked the Revenueâ€™s confirmation of the refinancing of a Sipp loan post A-Day to fall under new borrowing, and therefore under the new rules.

A J Bell says this could leave thousands of Sipps borrowing cash under the pre A-Day rules, where the maximum borrowing is 75% of cost of property; in order to aid commercial property purchase, stuck with uncompetitive loans.

Article from Gareth Vorster

Moreover, any borrowing related to in-specie transfer, or transfers consisting of assets rather than cash, from one Sipp provider to another, will also undergo a new test against the 50% limit.

A J Bell believes this blocks the ability of many Sipp members to change their Sipp provider.

Andy Bell managing director of A J Bell Group, says: "This is very penal. Unless some disgruntled Sipp clients change Sipp provider before 6th April 2006, they will be locked into their Sipp provider until their loan is reduced to 50% of the net asset value of the Sipp.â€�

He argues Sipp clients will also not be able to refinance any pre A-Day Sipp loans unless the new loan is within 50% of the net asset value of the Sipp, which would lead them to have to fork out thousands of pounds in overpaid interest.

Bell adds: â€œUnlike the majority of the new pension legislation, the new borrowing rules have not been thought out properly. Any sensible representations and suggestions we have made have been clouded by the desire of government to dampen down the overhyped impact that Sipps will have on the residential property market.â€�

Media relations at the HMRC, Patrick O'Brien says: â€œThe borrowing rules will apply equally to all registered pensions from the 6 April 2006. Any new borrowing after A-Day will be tested against the new rules.â€�

The Revenue says for members wanting to transfer funds from one scheme to another, they will have to ensure the borrowing rules are met by the new scheme.

The HMRC also said last week: â€œSipps and their advisors will have had a full two years notice of the legislation by A Day, which is clearly more than adequate to plan transactions so that they are not hampered by the rules.

Commenting on the confirmation of borrowing rules, Andy Taylor, individual pensions marketing manager at Scottish Life , says: â€œThis seems harsh if you are not increasing the amount you are borrowing, and you are only trying to obtain the best value for the scheme.â€�

He says the same can be said for in-specie transfer, as an individual may only want to switch so as to reduce charges or increase the flexibility of the contract.

He adds: â€œGiven the likely expansion of the Sipp market in the next few years, we can expect many new products to be launched. This will probably increase the flexibility and quality of the products on offer and reduce the costs of running a Sipp. So even acting now is no guarantee that people with Sipps won't fall foul of these new rules at some stage in the future.â€�

John Moret. director of sales and marketing at Suffolk Life, says: â€œThe HMRC's tough line on existing borrowing seems unreasonable although not unexpected.â€�

Moret says while the reduction in limits for new loans may well be accepted in order to obtain greater investment freedom after April next year, the imposition of the new limits proposed is â€˜arguably an unfair and retrospective alterationâ€™ of the terms on which many individuals have entered into commercial property transactions.

Sipp's is what everybody is talking about

2005-08-09T09:17:00.000Z

Close to four in ten current Sipp investors would look to use their Sipp for property purchase, following new pension rules post A-Day, research indicates.

Hargreaves Lansdown says with the current Sipp market consisting of about 140,000 contracts, this would result in 51,800 Sipp property purchases and would boost the UK housing market by 5%.

The investment broker calculates the 51,800 property purchases valued at an average of Â£195,000, would increase property demand by Â£10bn.

The research also finds 85% of respondents intend to buy property in mainland UK. And eight in ten Sipp property investors plan to invest in a buy-to-let, while 42% will invest in a holiday home, with 14% intending to put their main residence into a Sipp.

Spain, along with France are seen as the most popular overseas destinations for investment, however Hargreaves Lansdown says the breadth of interest suggests the demand may be more robust than previously anticipated, with countries including Israel, Turkey, Croatia, Pakistan and South Africa also attracting interest.

Moreover, of those respondents intending to buy a property, 47% intend on bumping up their pension contributions specifically for this purpose, while 75% plan to borrow within their Sipp to finance their property purchase.

And nearly six in 10 investors reveal they would invest more in their pension if they didnâ€™t have to buy an annuity.

Hargreaves Lansdown says: â€œThe implications for the property market are intriguing; possibly pension funds will take up the slack in the market, keep prices buoyant and make it even harder for first-time buyers to join the game; possibly the arrival of pension funds will simply defer and intensify the price crash which some believe will inevitably arrive sooner or later.â€�

SIPP's could boost the housing market?

2005-08-01T08:48:00.000Z

LONDON (Reuters) - New rules which would give investors tax breaks if they invest their personal pensions in property could boost housing market demand by 8.5 billion pounds or 5 percent from 2006, a study showed on Monday.

From April next year, Britons will be able to invest up to 215,000 pounds in self-invested personal pension (SIPP) plans in residential or commercial property, at home or abroad, and obtain full tax relief.

A higher-rate tax payer could then buy an apartment in the south of France, or a cottage in southwest England, for 200,000 pounds and it would cost 120,000 pounds, with the government making up the rest.

According to research from leading independent financial advisor (IFA) firm Hargreaves Lansdown 37 percent of current SIPP investors are interested in using their pensions for property purchases.

With 140,000 existing SIPP contracts, many opened by high-net-worth professionals, this could result in nearly 52,000 additional pension property transactions at an anticipated average value of 195,000 pounds, according to the SIPP Hargreaves Lansdown survey.

So a total of 10 billion pounds in extra capital flows could be trying to find a home in bricks and mortar in Britain and overseas from April.

As 85 percent of those surveyed said they are planning to buy property in Britain, total domestic housing market transactions of about 174 billion pounds (2003 level) a year may be boosted by 5 percent or 8.5 billion pounds, the firm said.

A big majority of SIPP property investors -- 79 percent -- are planning to put money into buy-to-let properties, followed by 42 percent for holiday homes. Just 14 percent propose to invest in their own principal residence.

The rental income and capital gains on the property going back into the SIPP is tax-free and can be used to pay-off the mortgage.

Some 32 percent of sipp respondents said they are planning to use their SIPPs to invest in overseas property, with Spain the most popular target closely followed by France.

Under the new rules, borrowing of up to 50 percent of the value of the pension plan to invest in property is allowed and 47 percent of those surveyed planned to increase the value of their pension contributions specifically to buy real estate, with 75 percent proposing to borrow within the scheme itself.

The survey took place in June and July, 2005 and consisted of 614 questionnaires completed by members of the public who had expressed an interest in investing in property via a SIPP and also a telephone poll of 180 randomly selected Hargreaves Lansdown SIPP investors.