Financial Times On Sipps

[ILikeBigBoobs]

http://news.ft.com/cms/s/2705ab00-5114-11d...00779e2340.html

Lex: Sipps

Last updated: November 9 2005 20:09

Sipps are being guzzled. Standard Life has sold £1.1bn worth of self-invested personal pensions since it started offering them last December. At the Scottish insurer, this product is growing at a rate of more than 250 per cent. UK savers are attracted by its tax advantages and flexibility.

From next April, Sipps become even more attractive, since investors will be able to hold a wide range of unregulated investments, from antiques to wine to residential property, in this type of pension plan................

.............. the unregulated nature of Sipp investments raises fears of another mis-selling scandal. The tax breaks being offered may also be too generous to last. The UK pensions industry will therefore be watching for a crackdown from the Treasury.

Comments like the above in the FT will only hasten the rush into SIPPS before this tax break is closed!

My accountant tells me that some of his wealthier clients are seriously interested in placing property into SIPPs and he is advising them that this may be a very good idea especially where they are paying lots of 40% tax.

[Starcrossed]

http://news.ft.com/cms/s/2705ab00-5114-11d...00779e2340.html

Comments like the above in the FT will only hasten the rush into SIPPS before this tax break is closed!

Mortgage Tax Relief, 1989, anyone?

[Realistbear]

It is a huge mistake on the Government's part. I checked with my pensions advisor and he confirms that I can put 100% of my salary into my pension plan as of April 2006 and have the government add 20-40% to the total amount. I live off the equity from my STR upon which there is similarly zero tax to pay.

Result: Salary increases by up to 40% TAX FREE. Current income from STR: TAX FREE.

I am closing in on retirment and can afford to stash cash in a pension while living on STR funds. But the government loses out BIG TIME. No wonder growth in this area is 250%--its the biggest cash giveaway since 1438 when the then Chancellor dropped bags of cash off the back of a cart and it was picked up by feverish peasants.

Remember--you can only "cash out" 25% from a pension plan but this will be more than enough for a downpayment on another home post-HPC.

Do you think Gordon will cotton on? Or will he have to go through with the cash giveaway because he believes it will be the only means by which HPI can continue?

Edited November 10, 2005 by Realistbear

[delboypass]

is there any site which tells you about SIPPS facts now??

When is a decision to be made if residential properties will be included in SIPPS?

[Realistbear]

is there any site which tells you about SIPPS facts now??

When is a decision to be made if residential properties will be included in SIPPS?

Isn't it the case that ANYTHING can be put in a pension fund after 2006? Paintings, old cars, salaries, racehorses etc.

Houses are a potential problem for SIPPS as you lose control of the property due to the rules making you have at least 2 trustees. Also, with the HPC threatening sensible money will probably go the more usual pension route--you can buy "safe" investments such as ultra short bonds and other secure cash instruments.

[ILikeBigBoobs]

A flat rate of relief for all taxpayers of perhaps basic rate + 3% (or 25%) would seem a much fairer tax break. Most 40% payers will make adequate pension provision and don't need this carrot where those paying 22% are the ones who won't have.

I find the governments stance on this strange, expecially as Brown may well lose several Billion in revenue!

[brainclamp]

SIPPS will impact the market hugely come A day in a few months time. The only problems I can see are the running costs of a SIPP, but they will rapidly come down as the market takes off, meaning the choice to get one now is compelling.

This effectively gives all the real resources of the UK to the rich for 40% off.

Whats interesting is that the Old Labour party would - 'tax the rich till the pips squeek', and 'nationalise the means of production'.

Here we have the means of producxtion and assets of the country handed over on a platter to the very

rich.

The ordinary worker is effectively 40% worse off in real terms, his salary cannot buy capital (The means of production - as the Labour party call it) on the same basis.

Its uttlerly shocking however you stack it up.

[Guest]

Gordon MUST be thinking ahead with this. There must be some tax sting in the wings for 2007 or 2008.

[Sledgehead]

http://news.ft.com/cms/s/2705ab00-5114-11d...00779e2340.html

.............. the unregulated nature of Sipp investments raises fears of another mis-selling scandal. The tax breaks being offered may also be too generous to last. The UK pensions industry will therefore be watching for a crackdown from the Treasury.

Comments like the above in the FT will only hasten the rush into SIPPS before this tax break is closed!

I don't think you understand what Lex is saying here. See the red: those are his negative feelings about SIPPS. Not ethe use of the word "also", to imply "too generous" is a negative.

Don't you understand why this is important? Once you put money into a pension THAT IS IT. If the Treasury reduce the tax breaks, your money is stuck in a tax inefficient place. And make no mistake, this Treasury could and has done this sort of thing b4. Think about the loss of the dividend tax credit for shares held in a pension fund. Because of this pensions are 5bn a year worse off. That's 40bn robbed from pensions since Nulab took office. Andstill folksl wonder why there is a "black hole" in pensions.

Think about it.

Here's what zuzuspetals's NuLab MP said :

The problem lies with the much wider issue of higher rate tax relief, and other tax exemptions, on pension fund contributions. ...

It should also be recognised that there is an advantage in encouraging extremely wealthy people to reinvest their wealth within the United Kingdom rather than allowing this kind of wealth to simply leak overseas. ...

I am not yet convinced that the use of SIPPS for residential property purchases will automatically impact on the cost or availability of affordable housing for purchase. However, the first year of the operation of the new rules will need to be monitored extremely carefully. I shall have no hesitation in raising this matter in the House of Commons, and proposing changes to the rules, if there is the slightest evidence that the new rules on SIPPS are impacting adversely on first time buyers.

( see I Wrote To My Nulabour Mp Regarding Sipps, And the reply was... )

As I said

Imagine suggesting as a serving MP in the governing party, that a rule that will TRAP wealthy peoples' money in the country could later be subject to changes! Why imagine: he just did it! If I were thinking of bringing some tax exiled money back to the UK to shelter it in a SIPP this would scare the conkers off me!

BC says:

Whats interesting is that the Old Labour party would - 'tax the rich till the pips squeek',..Its

I'm beginning to wonder whether Nu Labour are not so different.

The Lex article only raises my suspicions further. This is beginning to smell more and more like a tax trap for the wealthy every day.

Edited November 10, 2005 by Sledgehead

[patprimer74]

Whats interesting is that the Old Labour party would - 'tax the rich till the pips squeek',

Nice invention, brainless. You're getting a bit mixed up with the post WWI proposal that Germany pay reparations for starting the war and that they should 'pay 'til the pips squeak'. You don't write for the Daily Mail by any chance? They're great inventors, too.

p

[IPOD]

is there any site which tells you about SIPPS facts now??

Yes. You're on it.

When is a decision to be made if residential properties will be included in SIPPS?

Can people PLEASE read the SIPPs thread pinned at the top of the main forum before contributing to threads like these. The short answer is post A-day, residential property can be put in a SIPP but only if your SIPP provider allows it (which they may not).

[Casual Observer]

Nice invention, brainless. You're getting a bit mixed up with the post WWI proposal that Germany pay reparations for starting the war and that they should 'pay 'til the pips squeak'. You don't write for the Daily Mail by any chance? They're great inventors, too.

p

Pat, you're obviously a bit youngewr than me. That famous quote was re-used by Dennis Healey, the Labour Chancellor during part of the 60's/70s!

Puts me in mind of another quotation;

We will get everything out of her that you can squeeze out of a lemon and a bit more.... I will squeeze her until you can hear the pips squeak. My only doubt is not whether we can squeeze hard enough, but whether there is enough juice.

Said of German war reparations following World War I by Sir Eric Geddes (1875-1937), British Conservative politician, in December 1918 at the Guildhall, Cambridge, England.

It was re-used by Denis Healey, Chancellor of the Exchequer, on presenting budget to Parliament in May 1978;

[it will] squeeze the rich until the pips squeak.

Follow Ups:

Edited November 10, 2005 by Casual Observer

[Sledgehead]

Well said IPOD. I think we should start PMing folks rather than break the thread flow. Whether ILBB has realised it or not, his post raises a serious question : Do SIPPS offer a genuine tax break or are they merely a tax trap to keep wealthy people's money in the country? That's the real subject of this thread.

Edited November 10, 2005 by Sledgehead

[mightytharg]

I know it's probably a ruse but I'm still going to try to scrape together 200K to put into a SIPP next year. Maybe Labour will be out of power before they can spring the trap.

Bizarre that five years ago they were all for limitless taxes (not even stopping at 100% in some cases). Now they are letting us defer all tax until we retire. Let's hope they've seen the error of their ways.

Never fear, the economy worked fine before when we had no income tax. It should work again, we must have paid for the Napoleonic war by now.

[ILikeBigBoobs]

I don't think you understand what Lex is saying here. .

Please, try not to be so condescending.

By the way. The real tax break (the 40%) comes in year one! That is very unlikely to be rescinded retrospectively(once granted) nor indeed is the tax free status of (rental) income within the SIPP.

Edited November 10, 2005 by ILikeBigBoobs

[IPOD]

The real tax break (the 40%) comes in year one! That is very unlikely to be rescinded retrospectively(once granted) nor indeed is the tax free status of (rental) income within the SIPP.

On the contrary it is very easy to rescind these tax breaks retrospectively; you simply abolish the 25% tax-free lump sum option on drawdown, and make all income and capital extracted from a SIPP taxable at the member's highest marginal rate.

[ILikeBigBoobs]

On the contrary it is very easy to rescind these tax breaks retrospectively; you simply abolish the 25% tax-free lump sum option on drawdown, and make all income and capital extracted from a SIPP taxable at the member's highest marginal rate.

I didn’t say it would not be easy to change the rules, I said it was unlikely that they would be rescinded retrospectively. You can dream up as many hypothetical futuristic situations as you like but I prefer to deal with the facts as they (are about to) stand.

I dislike the implications of this new bill as much as most people on this site and am surprised that the main participants and its owners have done little or nothing to oppose the introduction of residential property into SIPPS. Instead it seems people either put their head in the sand and pretend it will have no effect or simply moan, rather than do anything constructive. If this site was going to be any use it should have formed an organized opposition voice, contacted MPs, written to the press, both local and national, and made a nuisance of itself. Instead nothing! A chance wasted IMHO.

[Casual Observer]

I know it's probably a ruse but I'm still going to try to scrape together 200K to put into a SIPP next year.

If your income is less than 200k pa there will be no point. Is it?

[Realistbear]

Gordon MUST be thinking ahead with this. There must be some tax sting in the wings for 2007 or 2008.

Gordon is planning ahead: he needs to keep HPI going to take up residency in No. 10. A HPC will be his and Nu Labour's undoing.

So--its HPI at ALL COSTS--oiling the propaganda machine daily (BBC) and spinning the bad news with meaningless statistics that would make "Yes Prime Minister" blush.

[Guest]

So if HPI is to get Gordon into No 10, then what?

Different priorities, maybe?

[Realistbear]

So if HPI is to get Gordon into No 10, then what?

Different priorities, maybe?

My guess is that the overriding ambition to be PM is so great that the mess that is inherited will not matter. Problem Gordon has is that he can't point the finger at anyone other than himself when the tally man comes to collect on all that cheap credit that has been keeping the economy going. My fear is that the UK has been riding on almost nothing but house price inflation for at least the past 9 years (since the end of the last HPC in 1996 or thereabouts). The forward momentum of the economy is now starting to grind to a halt and there is nothing else to keep the beast alive so Gordon has to keep flogging the HPI horse until it falls of the cliff--hopefully after he has had at least 4 years fun as PM. What surprises me is that Tony is hanging in past the 'sell by date'--its probably an unwillingness to surrender the prestige of office and slip into obscurity. Never underestimate the power of these people's egos--it is what drives them.

Edited November 10, 2005 by Realistbear

[foxytrader]

Please, try not to be so condescending.

By the way. The real tax break (the 40%) comes in year one! That is very unlikely to be rescinded retrospectively(once granted) nor indeed is the tax free status of (rental) income within the SIPP.

Hi ILBB

Yes the tax break does come in year one and it will be very valuable but it is well worth remembering that if you have income in excess of £200k pa there have been several methods of obtaining 40% tax relief in existence for years. Be assured the savvy rich have been getting tax relief for years through CGT reinvestment vehicles, uncapped retirement annuity contracts, film sale and leaseback schemes etc etc

[Guest]

Well, we did have a bit of an Internet boom, which was pretty good. Spendy-spend-spend.

[foxytrader]

It is a huge mistake on the Government's part. I checked with my pensions advisor and he confirms that I can put 100% of my salary into my pension plan as of April 2006 and have the government add 20-40% to the total amount. I live off the equity from my STR upon which there is similarly zero tax to pay.

Result: Salary increases by up to 40% TAX FREE. Current income from STR: TAX FREE.

I am closing in on retirment and can afford to stash cash in a pension while living on STR funds. But the government loses out BIG TIME. No wonder growth in this area is 250%--its the biggest cash giveaway since 1438 when the then Chancellor dropped bags of cash off the back of a cart and it was picked up by feverish peasants.

Remember--you can only "cash out" 25% from a pension plan but this will be more than enough for a downpayment on another home post-HPC.

Do you think Gordon will cotton on? Or will he have to go through with the cash giveaway because he believes it will be the only means by which HPI can continue?

No you can put your salary into a pension and receive tax relief but it will only equate to the amount of tax paid so if you earn £50k then you will get roughly £15k at 40% £30k at 22% and the rest at zero or 10% relief. You start with the gross figure and then deduct BRT. The balance needs to be claimed in your self-assessment form.

You have been able to obtain marginal rate tax relief for years - why didn't you do it before?

[mightytharg]

If your income is less than 200k pa there will be no point. Is it?

It's not polite to ask someone's income, but just FYI I could defer some of my income by leaving it in my company account this year and then combine it with my next year's salary to make up the 200k.