Brown kills residential property SIPPs?

dunstonh

To me the lesson is: never let your investments be determined by tax considerations.

Why?

Say you want to invest in a certain area and the same fund/investment is available in each of those areas. Tax considerations then play a major part on where it should go.

EdInvestor

Perhaps I should have said "led" by tax considerations.

My point is that you can't rely on the tax system remaining as it is forever ( or indeed even until next week.)

So if you would not consider an investment if it didn't have an attached tax perk, then I suggest you don't consider it at all, because there's no guarantee the tax perk will last.

deemy2004

dunstonh wrote:

Why?

Say you want to invest in a certain area and the same fund/investment is available in each of those areas. Tax considerations then play a major part on where it should go.

Well specifically to the residential properties in SIPPS - What are all those fools who bought before the announcement goign to do now ? As they are now liable to 40% tax !

[Deleted User]

hehe.

near where I live, some rich man bought 4 apartments for 249k each. Serves him right for being greedy

dunstonh

Well specifically to the residential properties in SIPPS - What are all those fools who bought before the announcement goign to do now ? As they are now liable to 40% tax !

Serves them right for jumping the gun. I, and the other IFAs on this board are on record in saying that people should have waited. We were making posts like that weeks ago.

EdInvestor

For anyone who has opened a SIPP with a plan to invest in the residential property market, there are other ways to do it.

There are the REITS, coming up (Real Estate Investment Trusts) - the upside of the SIPP ban is that REITS have at last been authorised, everyone's been waiting for them for 2 years. :rolleyes:

You can buy shares (only possible in a SIPP ) in housebuilders, or property companies,

Or banks that offer BTL mortgages.Or even real estate agents, or websites like Rightmove.

You only have to use a bit of imagination.

Or, you could consider commerpcial property instead - either an actual property or funds and trusts that invest in such properties, plenty of them available.Commercial properties have much more stable, and higher income than residential, which makes them more suitable for a pension anyway.

I'm sure people like Standard life will produce an "alternative package" for all their new SIPP investors quite soon.

meanmachine_2

Yeah nice try Ed.

As you know full well, people were interested in buying a property, not bits of property (otherwise known as bricks), or shares in companies that make property.

It's the tangibility of buying a house that people were turned on by. These REITS sound no different to buying equities. Pointless.

Especially when, as we all know, property as an investment asset is 32% overvalued already.

Buying that at a 40% discount, which doubles up as a holiday home, is incredibly attractive. Buying a share in a homebuilder is about as sexy as a wet weekend on a building site in Bognor.

cheerfulcat

dunstonh wrote:

Serves them right for jumping the gun. I, and the other IFAs on this board are on record in saying that people should have waited. We were making posts like that weeks ago.

dunstonh, the real problem is that the Chancellor has once again undermined confidence in pensions. Also, the industry has spent millions setting up plans which are now useless ( and I wonder who's going to pay for that? ); not *all* IFAs were saying wait and see...you can't really blame people for trying to get in before the rush.

sippnewbie

i find many peoples responses here quite unreal. "serves them right"/ "greedy" / "jumping the gun" etc etc... are you people really so unsuccessful you get pleasure from others financial misfortune (kittie!)? i agree allowing residential property into sipps was a silly idea but can you blame people for wanting to take advantage of it? dunstonh your advice was absolutely correct last week but it was contrary to several ifas i spoke to prior to posting on this board, so im not sure you can blame people who probably got badly advised. my exIFA would have had a big fat fee from me if i didnt think it was "too good to be true" and checked it out.

im now extremely reluctant to invest anymore money into a pension (other than standard work pension), god knows how much the next 20 chancellors will destroy its value before i can actually claim from it, probably when im 130.

EdInvestor

Hi meanmachine

meanmachine wrote:

As you know full well, people were interested in buying a property, not bits of property (otherwise known as bricks), or shares in companies that make property.It's the tangibility of buying a house that people were turned on by.

Regardless of what they may have thought they were doing, if they had decided to get a SIPP and use it to purchase property , what they were doing was investing in the residential property market.(It was made very clear right from the start that market rent would have to be paid for personal use of holiday homes for instance, so the pension fund made a return from the investment.)

These REITS sound no different to buying equities. Pointless.

Why is it pointless to buy equities?

Especially when, as we all know, property as an investment asset is 32% overvalued already.

If that's so, you wouldn't want to be investing in property would you?

Buying that at a 40% discount, which doubles up as a holiday home, is incredibly attractive.

But this is not investing in the residential property market at all, is it? It's using tax relief to acquire a second hiome, isn't it? Does it thus surprise you that is has been banned?

Buying a share in a homebuilder is about as sexy as a wet weekend on a building site in Bognor.

Homebuilders are quite good value at the moment IMHO, their prices are low because the market is depressed.Possibly not a bad investment, unlike residential property in SIPPS.