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crash 2005

Sipps ‘could Prove To Be A Damp Squib’

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http://www.estateagencynews.co.uk/news/cur...news-1105e.html

Broker backs RICS view on pension plans

DON’T hold your breath for Self-Invested Personal Pensions containing residential property having a major effect on the housing market.

That is the message from the Royal Institution of Chartered Surveyors, who say there has been no evidence yet that there will be a flood of interest in the SIPPs when they are allowed from April next year.

With less than six months to go, the RICS say their members have received only limited inquiries — and a leading buy-to-let mortgage broker has also poured cold water on the measure.

“We expect a very modest uplift in house prices as a result of SIPPs because of the drawbacks that they present to potential investors,” said RICS chief economist Milan Khatri.

“The restriction that will be placed on how SIPPs are run and maintained, and the lack of flexibility in terms of accessing capital and rental income, means they will not necessarily going to be attractive to all higher-rate tax payers, who will receive the largest tax breaks.

“Limits on the annual contribution that can be made to SIPPs funds to that of the yearly salary (to a maximum of £215,000), together with a maximum borrowing limit of 50 per cent of the fund value, mean that only relatively cheap property will initially be accessible to most potential buyers.

The RICS view was supported by Lee Grandin, the managing director of buy-to-let broking specialist Landlord Mortgages.

“The advantages of investing in residential property through a SIPP will only be of interest to a relatively small proportion of the population — it is simply too costly for most consumers!” said Mr Grandin. “Therefore I don’t believe that they will have the monumental effect on the residential property market that some people are predicting.

“You would need a pension fund of at least £80,000 and to borrow an additional £40,000 to purchase the average UK buy-to-let property.

“From anecdotal evidence, I really don’t think that most UK consumers have this sort of money either in their pension pot or their back pocket!

“And even if they could access that sort of capital, they can only contribute 100 per cent of their salary or up to £215,000 — whichever is the lesser amount — into their SIPP each year.

“So unless they already have an existing pension fund of sufficient size, they are going to need to save for several years before they can even think about investing in residential property.

“From the perspective of an existing landlord or even a holiday home owner, SIPPS are also not that exciting!

“In order to include a property you already own into a SIPP, you would need to sell it to the scheme’s trustees and potentially incur a huge capital gains tax bill.

“Anything that encourages people to save for their retirement should be applauded but I really don’t think that the new regulations for SIPPs will have a revolutionary effect on the residential property market or solve the pensions crisis.”

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  • 302 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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