Does anyone know about the new pension benefits from April 06?

building

Does anyone know about the new pension benefits from April 06?
Does anyone understand how it all works. I read that the property market should still be buyant because of this new pension benefits. These include the prospect of buy to let investors effectively being albel to buy property at a 40% discount by investing through their pension fund from April 2006.
what are the costs to set up? will it be worth it?

dunstonh

We have talked about Pension "A" day quite a lot over the recent months.

I read that the property market should still be buyant because of this new pension benefits

Don't count on it. It is going to be a niche investment area.

The funds have to be in the pension first to allow the property to be bought. With house prices being what they are, you would need a fairly large fund. To build up that fund, you cant just put all the money in. You will be only able to contribute the equivalent of your full annual salary of £215,000 whichever is lower. So someone on 40k is going to take some time to build up enough to buy.

Other issues are that you will not own the property. It will be owned and controlled by the pension trustees. That will ramp up the costs of all paperwork and add delays as well. In addition, they will insist on professional workmen to carry out any repairs/mainenance that you may have done yourself or got done on the cheap. Every time something needs doing, it has to go through the pension management and that will involve fees.

There are already comments coming out that the residential property in SIPPs could end up being a potential issue in future with the wrong sort of person going into it. As the SIPP is not regulated by the FSA and as residential property doesn't come under the investment remit of most financial advisors, if it goes wrong, there will be little scope to secure any potential compensation from anyone.

Sure, if you have loads in your pension and a range of invesment areas already, then residential property in a SIPP may be an option. If it would be your only major investment, then its damned risky and may not be a cost effective option.