SIPPs could slip up investors

INVESTMENT PROPERTY NEWS: IN2PERSPECTIVE

Experts at the Property Investor Show (23 to 25 September, ExCeL London) are advising investors keen to take advantage of tax breaks on property purchases through pension funds next April to ensure they tread carefully before committing to any investments.

In advance of full clarification of the exact regulations regarding SIPP investments from the Inland Revenue (expected shortly), the complexity of the new pension regulations has been highlighted once again this week as the government announces that it may bring the funds under the regulation of the Financial Services Authority (FSA).

It is estimated that thousands of people will be rushing to purchase buy-to-let property through Self Invested Personal Pensions (SIPPs) when new regulations come into force on A-Day, 6 April 2006. But it is feared that many potential investors are unaware of the exact regulations concerning the funds or how they can make the most of their investments.

Nick Clark, M of the Property Investor Show, comments: “It is essential that potential investors ensure they research the options fully before committing any funds to a SIPP. Although the regulation changes have the potential to benefit a great many investors and boost their pension funds significantly, many people remain unaware of the best way to go about this. For example, existing funds need to start being restructured now if investors wish to use them to purchase property in April, and similarly off-plan purchases can be made already, providing the project will not be completed until after A-Day.

“There are further complications if the property is overseas and investors may find that their tax-free fund is still liable for local charges in the foreign country. There are ways of getting around this but it is likely to be a common slip-up for those who do not take advice from the experts.”

Barry Martin is an IFA for pension and property specialists Millfield Fountain who will be giving seminars on SIPPs investments at the Property Investor Show. He comments: “The advice I would give to anyone who is thinking about doing something with their pension next April, is that they need to act now to make sure they have a suitable fund set-up appropriately.

“There’s going to be an influx of fund transfers over the next six months and providers are already saying that anything that’s not in by Christmas will not be ready in time for A-Day. It is therefore vitally important that investors do their research and take advice now to ensure they are ready for 6 April, and of course anyone with existing funds wishing to take advantage of the existing rules needs to do so as soon as possible.”

- 16 September 2005