SIPPS Could Include Residential Property

When the Chancellor delivered his Budget this week, he indicated that savers who run their own pension funds may be allowed to invest in residential property for the first time.

The document referring to this said that 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.

Referring to self-invested personal pensions (Sipps) and small self-administered schemes (SSASs), the document went on to say that any amendments would need to be “consistent with sound public finances and the Government’s wider pensions strategy”.

The current rules require Sipps to sell on development from commercial to residential status once the property becomes habitable, so allowing this would reduce the red tape that currently surrounds the investment.

However, the discussions the Government has with the “interested parties” will have to be extremely detailed, as the last time the idea was mooted, under Gordon Brown’s Labour government in 2006, it came to nothing because of the complicated nature of the rules.

There is also the concern over whether investors who already presumably have a lot of money tied up in property would want to have their pension dependent upon it as well.

Therefore, although getting residential property into pensions could be a good way to boost the housing market, the possibility of allowing property in Sipps and SSASs could be fraught with danger to investors, even if it is restricted to the conversion of unused commercial space, so they would be wise to seek professional advice if the idea comes to fruition.

Marc Stemmer offers financial planning advice to businesses and individuals; helping them to achieve their financial goals.

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