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Budget 2013: Sipp providers welcome residential property move

by William Robins on Mar 20, 2013 at 16:33

Sipp providers have welcomed the government's announcement that it will consult on allowing pensions to invest in some residential properties.

The consultation will cover whether residential property, created by the conversion of unused space in commercial properties, would be allowed. Currently pensions are not allowed to invest in residential property without incurring a tax charge.

The Treasury said in Budget documents: ‘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 encouraged by amending investment regulated pensions schemes rules. Any amendments would need to be consistent with sound public ﬁnances and the government’s wider pensions strategy.'

Andrew Roberts (pictured), partner at Sipp and SSAS provider Barnet Waddingham, said the move would cut 'unnecessary red tape' for Sipps and SSASs investing in commercial property.

'Opening up pension investment rules to allow commercial properties to be developed into residential would reduce unnecessary red tape that plagues such projects at the moment - current rules require Sipps to sell on developments before they become habitable - and so would be good for the property and pension sector.

“I would suggest a simple test such that pensions can own converted properties but have to dispose of them before they are leased out, and that members cannot occupy them. A clear statement should be made on whether a series of developments would constitute a trading activity, which is taxable even within a pension wrapper.'

Robert Graves, head of pensions technical services at fellow Sipp and SSAS provider Rowanmoor, also welcomed the move. 'It will be interesting to see how this will tie in with the FSA's plans to treat property investment as a non-standard asset incurring higher capital adequacy,' he added.

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21 comments so far. Why not have your say?

no, no, no, not more fscs!!

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The wheels on the bus go round and round... altogether now.. clap your hands.

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And of course, if they're in a SIPP please add a further 50% of the value to the provider's Cap Ad requirement to cover the risk.

Except if they're in an area of designated economic decline, where the provider should add 150% of the asset's value to their Cap Ad requirement.

Plus, let's add another 100 bodies to the FCA headcount to do the relevant supervision.

Laughable...

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Hear that? It's the sound of 50 unregulated companies popping up to "facilitate" this.

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This government is great at doing things when it suits them.

Don't individuals already hold enough of their personal assets in property?

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Why don't they bring back the BesRes, that was a lot of fun.

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I still don't get this. Do the Government propose to allow a property speculator who bought a closed butchers shop on the high street and is currently renting to the charity sector to convert the shop to a house using their pension money?

Or the conversion of an office block into flats as long as it is in a town centre. Whose pension fund is used? Do you transfer your pension into a SIPP, then invest in an unauthorised collective?

The property developers must have been eying up the huge sums of money in pensions and said to themselves: 'I know what, perhaps if we dress up a scheme as benefiting urban regeneration we can get a load of people who hate the fact thay cannot use their pension to buy a house, to invest'. 'This means demand will outstrip supply, and as developers we can clean up'.

Has the Minister fallen for this scam. Lets hope not.

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This is obviously an incentive for parents to purchase smaller properties to home their sibblings in and subsequently collect the rent as oppsoed to benefiting a third party landlord. Could in theory be a good idea, but may come at a price if the property has to sold to realise benefits at point of crystallzation and off course the associated fees in connection with SIPPS and property purchase.I can only surmmise this idea was thought up by Danny Alexander?

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This one does the rounds every couple of years - I dont see it ever happening.

Time will tell though!

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Sound FX - minefield being sown...

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Eh....I dont welcome it!

Disaster waiting to happen - stop playing with the rules!!!!

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Always fancied living between a charity shop and a pound shop. Seems a very odd and very narrow consultation. There can't be that many properties where this would work, and then get passed local planning.

Maybe the Freehold of a property where there is commerical below and residental above ?

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More hot air! The Government will consult? and then what will they do? Will this help to create a healthy housing sector?

My prediction is it won't happen!

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This is the usual rubbish (I hope). If we are not careful lots of left field fund people will be busy creating schemes where they build and convert so that the properties are sippable. Sounds like a scam to nail more 55% tax charges out of the pension wrappers to me!

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So, the government announces that they are going to consult about something. It makes the pensions headlines. Wouldnt it just be more honest to say "nothing much announced in today's budget"...

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Why would SIPP providers welcome these proposals? What is in it for them? They are facing issues about allowing unapproved investments without any due diligence. A change in the rules would leave them exposed to more regulatory problems and precious little income to show from it. Unless SIPP providers think it will be a good way to increase fees.

There may be a better reason, but at the moment I can't think of one.

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Fantastic opportunity, hopefully out with the juvenile "adviser market" . Coin a plenty for all but the failed GCSE brigade.

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@Hickky. (Red mark man) . Wake up smell the coffee. Unregulated business , is the new way forward......... You know stuff that doesn't need you !!!

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Mr Man, if you are going to continue to post on these websites, please educate yourself on what regulated business and unregulated business, and their interaction, actually means. Your obtuse, innacurate comments merely show how little you know about these topics.

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i think we should welcome this provided all the SIPP providers reserve at least 5% of the value of the property for the inevitable claims that will emerge.

this would soon sort out those who want these solutions but don't want to carry the can.

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Paul Boyd

Mar 21, 2013 at 11:29

Oh dear ,just as the FSA are looking very carefully at overseas property investments the government come up with this,will they never learn?I hoped that this year at least we could look forward to no changes to the rules but they have to tinker all the time. All this will do is get the stupid and the naiive worked up about residential property again and in a few years they will be screaming for compensation when it goes wrong.Most IFA's will run a mile ,if it ever happens!

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