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UK Housing Boom
(12/3/2005)
Experts have predicted that changes to UK pension investment rules early next year could cause a housing boom of up to 15%. However, they warn that property investors keen to take advantage should act now to ensure they do not miss out on the best opportunities.
The changes to the rules are due to occur on the 6th April 2006, ‘A-Day’, and will affect Self-Invested Personal Pensions (SIPP’s).
First introduced in 1989, SIPP’s at the present time can contain several types of investment, including commercial property. However after A-Day, it will also be possible to invest pension funds in residential and non-commercial property overseas and receive certain tax relief’s.
This move looks set to benefit not only those looking to enhance their pension funds, but also general property investors. One expert suggests that the high number of buyers coming to the market in the form of pension funds could boost house prices by up to 15% through increased competition for properties. This will benefit existing homeowners and property investors who could see their buy-to-let returns substantially increase as the market booms.
However the new rules will also mean dramatic changes in the lending ratios of SIPP funds. Currently, pensions can fund up to 75% of a commercial property investment, however changes on A-Day will limit this to as little as half of a fund’s value. This means that someone with a £100,000 pension fund can currently invest this in commercial property of up to £400,000, but after next April they will only be able to stretch this to £150,000. Investors who are keen to take advantage of opportunities in commercial property should therefore do so prior to the changes in April next year in order to make the most of their funds.
The new rules are great news and will create a surge of interest, but it is vitally important that people deal with a specialist. There’s going to be a lot of bureaucracy and complexity and so it is essential to use an IFA who is up to speed with the areas of both pensions and property; such as Candour Consultancy.
Candour Consultancy works closely with the leading providers of pension transfer plans and SIPPS. Should you have existing pensions benefits that you would like to use more effectively, Candour can provide a UK Pensions Office approved analysis of pension transfer options free of charge and without obligation.
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