Kathy, I'm afraid that the above posting displays very many misconceptions about the rules allowing residential property to be held in self-invested personal pensions (Sipps) which come into effect next April.
Sipps already offer a much wider investment choice than traditional personal pensions. But demand is forecast to soar after when the list of permitted investments opens up to include unquoted shares, paintings, vintage cars, loans and residential property.
Companies that specialise in Sipps say that the majority of clients planning to hold property intend to purchase buy-to-lets, but 15% want to put their main residence into their fund.
This option is not open to everyone, however. In fact I would guess that it would be open to very few as you only be able to use your home — or any other property — as a pension contribution if your annual salary is at least equal to its value and it is worth £215,000 or less. So how many people do you know who are on over £200k a year but whose home is valued at only £215k?
As for "taking the money out of your fund", you will also have to hand over ownership, and therefore control of, the property to your pension-fund trustees. This will probably mean having to ask permission every time you want work done to your home, and might mean you are banned from doing any work on it yourself. Also, having sold your home to your fund, you will have to either pay the going market rent, or a still-undecided tax charge, if you want to continue living there.
However, anyone who currently runs a Sipp or is about to start one, which would at present be invested in equities, bonds or a mixture of the two, presumably, could well benefit from all or part of theur fund being used to invest in "buy to let" properties. There are big tax advantages for buy-to-let landlords. They will be able to use untaxed income to invest and avoid tax on rental income, and capital-gains tax when they come to sell. This will in effect reduce the purchase price by up to 40%.
And investing in a buy-to-let through a Sipp could be a particularly good option for those with occupational schemes, but you will need a fairly large personal pension fund to consider this option. The new rules allow investors to borrow only up to 50% of their fund value to buy an investment property, although savers with smaller amounts may be able to arrange partial purchases.
But don't forget. it won't be you who owns the properties, it'll be your pension fund. So, in the same way as you can't turn any pension fund into cash on retirement you won't be able to say t the fund administrators "OK, give me the houses now." What you are likely to be able to do is to benefit from rantal incomes which will offer a better return than that which you would get from an annuity bought with your fund at the time of retirement.
How long before it is 60 and then 65?
