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Anne Ashworth On Sipps

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Look before you leap on to the Sipp property bandwagon

SHAMELESS eavesdropping has served me well and so, in public places, I always listen in to conversations. This confession will explain why I tuned in to the chat of two women on the bus. They were enthusing about the A-Day regime which will allow residential property to be held in a self-invested personal pension (Sipp). Rarely has retirement saving been discussed so passionately on public transport; these ladies believed that homes were guaranteed to appreciate. They were also excited by the tax reliefs that will be on offer.

Their conversation was probably inspired by reports that the A-Day concessions will produce a rural housing shortage. Townies (not dissimilar from my fellow passengers) are expected to snap up second homes in villages across the land. The debate over this issue is unlikely to cause the A-Day legislation to be withdrawn, but it will focus attention on the small print.

Imagine that you aspire to place a £300,000 cottage in your Sipp. After tax relief the cost would be just £180,000 if you are a higher-rate taxpayer. But limits apply to the amount that you can borrow to purchase the property. The taxman will allow you to take out a loan equivalent to only half the sum that you have previously stashed in your Sipp. This means that you would need to put a spare £200,000 aside even for a £100,000 mortgage.

If you take a holiday in your very nice place in the country, you would need to pay a market rent to the Sipp trustees. These people would also be in charge of maintenance, with their permission being necessary even for a change in decor. Minor considerations, maybe, but relying entirely on bricks and mortar is a large risk. Property should form no more than 20 per cent of a pension portfolio.

It is now rumoured that the Treasury is expected to put more impediments in the way of a rush to acquire second homes, striving to make the scheme worthwhile only for the very rich. Will the women on the bus investigate all the pros and cons fully before they become Sipp holders? I do hope so.

http://business.timesonline.co.uk/article/...1760529,00.html

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Guest Riser

I won't start a new thread as SIPPS has been done to death but here is an interesting article from the BBC which highlights IFA concerns:

IFA warning on property pensions

"that companies which are not regulated such as property developers will be using SIPPs to entice people to make property purchases which may not be in their best interest long term," he said.

"I think some developers will use it as an excuse to get rid of property that they were having difficulty with already."

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I won't start a new thread as SIPPS has been done to death

It may well have been 'done to death' but most new visitors will neither have seen what's been written nor been able to contribute and there's no doubt that SIPPs may well have a major effect on the housing market over the next few years. Firstly by putting a price floor under the lower priced properties and secondly by gradually removing residential property from the market, for once in a SIPP it's less likely to come out again onto the open market.

Personally I think it's ludicrous that a 'so called' labour government should be championing this bu, there you are, seems it's done and dusted!

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Personally I think it's ludicrous that a 'so called' labour government should be championing this bu, there you are, seems it's done and dusted!

Well it's quite obvious that the SIPP's issue has arisen so that Mr Blah has somewhere to put his property porfolio.

Dames :D

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Firstly by putting a price floor under the lower priced properties

Not likely. Few people would be able to afford one, even at vastly deflated prices. And if you had 50 or even 75K to put into property, would you risk your retirement on a hovel? Furthermore, those financially astute enough to aquire that sum in their pensions would not invest in a depreciating asset.

and secondly  by gradually removing residential property from the market, for once in a SIPP it's less likely to come out again onto the open market.

It will have to re-enter the market when the pensioner turns 75 at the latest. It may remove some properties but they will all have to come back later.

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and secondly  by gradually removing residential property from the market, for once in a SIPP it's less likely to come out again onto the open market.

?????

It never leaves the market in the first place , a SIPP is merely a tax effecient wrapper not some other world where property is never to be seen again.

D :blink:

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So how do I start a company being a SIPPS property manager?

You cant, sipps providers dont manage property , property managers do, who will be contracted by the sipp provider to run the properties.

A SIPP provider is just a vehicle to reclaim tax and somewhere for an individual to run their own pension essentially.

D

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You'd be surprised how much money some people have !

The average pension in the UK is about 30K. If pensions follow wages, fewer than 5% of all pensions are greater than 100K. My previous arguements stand. Those in the know (including myself, my pension is about 250K), would not through their money at a depreciating asset.

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I said OPEN market. SIPPs can be handed down from one generation to the next - and will be!

I know there has been alot on this site about SIPPS already, but there a a few points that always seem to get overlooked.

1) The annual contribution you can make is the lesser of 200k or your annual salary. Most people cant contribute enough into their pensions to make use of all these elaborate property related schemes touted by the papers.

2) You can only borrow 50% of the value of the fund. There is also a limit of the % of a property you can borrow (I think 50%). Again, the average person has too little in their fund to play property even if they want a suicidally narrow portfolio.

3) Yes, the principal in a SIPP can be passed on but only after the payment of a large tax bill (I think the fund is taxed then it goes into your estate where it gets hit by IHT).

Direct property investing in a SIPPs is only open to very few. Its going to have absolutely no impact on the market.

Its also a particularly sh!te investment at the moment but another topic.

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Those in the know (including myself, my pension is about 250K), would not through their money at a depreciating asset.

September 05, 2005

Banks set for sharp increase in mortgages to landlords

By Caroline Merrell, Banking Correspondent

BANKS in the buy-to-let market are looking forward to a sharp rise in demand for loans resulting from an expected 40 per cent surge in the private rented sector.

The Centre for Economics and Business Research believes that Britain’s private rented sector will surge by a million homes to 3.5 million over the next eight years.

A rise in immigration, changes to pension legislation and an increase in the number of single-person households all are expected to fuel the increase.

http://business.timesonline.co.uk/article/...1765257,00.html

Obviously you are better informed than The Centre for Economics and Business Research

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September 05, 2005

Banks set for sharp increase in mortgages to landlords

By Caroline Merrell, Banking Correspondent

BANKS in the buy-to-let market are looking forward to a sharp rise in demand for loans resulting from an expected 40 per cent surge in the private rented sector.

The Centre for Economics and Business Research believes that Britain’s private rented sector will surge by a million homes to 3.5 million over the next eight years. 

A rise in immigration, changes to pension legislation and an increase in the number of single-person households all are expected to fuel the increase.

http://business.timesonline.co.uk/article/...1765257,00.html

Obviously you are better informed than The Centre for Economics and Business Research

Obviously.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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