Brown kills residential property SIPPs?

lush_walrus

Yep its all true, to be honest it was all a bit of a red herring for the normal pension saver out there anyway, so the fact that he has backed away from residential will leave investors in the commercial sector which makes much more sense for the economy as a whole.

Personally, I didnt expect it to make a huge difference, the power is still with the banks. If they introduce any further borrow as much as you like for whatever you like mortgages, then the prices will just keep on going.

whiteflag_3

JCL wrote:

LMAO!

What is it Labour stand for again??? Not a lot.

Give me the Conservatives any day.

Pensions simplification - plug pulled on residential property and alternative investments

In a bombshell announcement, the Chancellor has stated his intention to impose punitive tax charges where "self-directed" pension schemes such as SIPPs and SSASs invest directly in residential property or other "prohibited investments" such as fine wines or vintage cars after A-Day.

The new measures could mean tax charges of up to 70% on prohibited investments - with the ultimate threat of scheme deregistration, and a further 40% tax charge on the total assets, where prohibited investments exceed 25%.

Pooled investment in residential property vehicles such as the Government's proposed new real estate investment trusts will be allowed, but there will be measures to prevent abuse via indirect investment (for example, by using a pension scheme to buy a controlling interest in a residential property investment company).

The wider pension investment powers, which until today were not thought to be in doubt, were one of the most widely welcomed Pensions Simplification changes - stimulating sales of self-investment products in the run-up to A-Day. Advisers now face the prospect of having to revisit the advice given to thousands of clients.

Brown is an idiot.

Why?

It seems like common sense has prevailed at last.

You could say Brown has been very clever- release draft regulations, give the industry , journalists and the public a year or so to find all the loopholes and then plug them all at the last minute.

Hopefully now pensions will again be regarded as a retirement planning tool rather than a tax dodge for the rich!

oceanblue_3

oceanblue wrote:

Yes, it certainly looks as if you're right. Here's the link


http://www.hmrc.gov.uk/pbr2005/pensions-simplification.pdf

Nevertheless, as I'm sure you'll agree, drawdown still isn't going to appropriate for everyone.

However, this suggests a different interpretation.....

Lump sum death benefit rules

After A-Day, a lifetime annuity or scheme pension will allow a lump sum death benefit to be paid where the member dies before age 75. The amount of this lump sum is the amount crystallised by buying the annuity or scheme pension, less the pension instalments, and subject to 35% tax. This has generally become known as the value protected, or capital protected annuity.

If, however, the member initially decides to enter into unsecured pension (income withdrawal) and then subsequently purchases an annuity or scheme pension, on their death, no lump sum would have been payable. This is caused by the way the amount crystallised at the purchase of the annuity or scheme pension is actually reduced by the amount previously crystallised by going into unsecured pension.

To address this anomaly, legislation will be introduced in the Finance Bill 2006 to ensure that a lump sum death benefit can be paid on the member's death after an annuity or scheme pension is purchased from an unsecured fund. This will ensure that people going into unsecured pension first will not be disadvantaged when they come to secure that income through an annuity or scheme pension.....

which sounds like annuitisation must occur, post-75, before the 35% tax charge is set aside.

fairenoughclough

whiteflag wrote:

Why?

It seems like common sense has prevailed at last.

You could say Brown has been very clever- release draft regulations, give the industry , journalists and the public a year or so to find all the loopholes and then plug them all at the last minute.

Hopefully now pensions will again be regarded as a retirement planning tool rather than a tax dodge for the rich!

Interesting post, ultra-cynical in para 2 and then ultra-naive in para 3.

al_yrpal

There is nothing whatsoever to stop anybody buying a second property and holding it with a view to selling it for a profit when they retire. I am just about to sell mine acquired in 1997. I could have let it, or let it as a holiday rental, I never did, I just enjoyed it. It isn't in a pension, and I shall pay the small amount of CGT. The proceeds won't have to be in an annuity, or subject to any drawdown regulations, or financial advisor charges.

I find the sheer greed of those whingeing about Brown's decision to not offer tax relief for such purchases in SIPPs repulsive. My heart bleeds for the spivs in the pensions industry who thought this was going to make their fortune.

whiteflag_3

fairenoughclough wrote:

Interesting post, ultra-cynical in para 2 and then ultra-naive in para 3.

Para 2 not being cynical

Para 3 you think its naive I made it in hope!


Post something usefull you clown!

dunstonh

The proceeds won't have to be in an annuity, or subject to any drawdown regulations, or financial advisor charges.

Don't turn into Ed.

It may not have any financial advisor charges. However, you will have estate agent charges, solicitor charges and have a tax bill to pay. So the comment about financial advisor charges is pointless.

Milarky

Thanks to Oceanblue for that useful link. Have also spotted there that the much touted "instantly boost the value of your pension!" headline [beloved of the Sunday papers] - aka 'recycling' will be prohibited:

[url=]http://www.hmrc.gov.uk/pbr2005/pensions-simplification.pdf[/url]

2. Recycling of tax-free lump sums

The Government is also taking action to stop the potential abuse of the pension tax simplification rules by means of a device designed to boost the amount in a pension scheme through the artificial generation of tax reliefs.

The device works by the scheme member withdrawing a tax free lump sum which is reinvested back into a registered pension scheme, automatically generating further tax relief on the amount reinvested. This in turn allows a further tax free lump sum to be paid out, so that the cycle can be repeated. This has become known as “recycling”.

Given that pension income is taxed at a member’s marginal rate, anyone recycling in this way is effectively exchanging a tax free lump sum for a future stream of taxed income and therefore the potential benefits are unlikely to be large. However, this device is abusive as it is intended to do nothing more than generate artificially high amounts of tax relief through a circulation of money.

To prevent individuals from artificially boosting their pension funds by recycling tax free lump sums in this way an anti-avoidance rule will be inserted into the new pension tax simplification legislation, to take effect from 6 April 2006 (A-Day). The legislation will target cases where lump sums are taken with the sole or main purpose of reinvesting them in a pension scheme to create additional pensions savings through the additional tax relief granted. The new legislation will remove tax advantages in relation to lump sums which are artificially recycled in this way.

This legislation will not affect cases where a person withdraws a tax free lump sum as part of the normal course of taking pension benefits.

al_yrpal

Those charges are quite normal with any property sale. Although I don't have any 'drawdown', I understand from my IFA that if I did, I would have to sit down with him every year to decide how much I should draw for which I would have to keep paying fees.
I prefer to make my own decisions, be in charge of my own finances, and avoid ongoing fees.

EdInvestor

al_yrpal wrote:

I understand from my IFA that if I did, I would have to sit down with him every year to decide how much I should draw for which I would have to keep paying fees.I prefer to make my own decisions, be in charge of my own finances, and avoid ongoing fees.

What nonsense. There is no requirement to have an IFA to do drawdown whatsoever. And these days you can do it extremely easily online in a low cost SIPP paying no annual fee.

The lies some of these people spout are just unbelievable, :mad: