Sipps , A-day, residential property etc.

shinyuk

Hi all,

My first post!

With A-day looming, I have a few questions.
1) Where's the cheapest place to buy a Sipp, especially a property friendly one.
2) Also what are the likely transfer costs from a PP.
3) If I transfer an existing property into the SIPP, how will it work
e.g. Property Value - 150K
Pension Pot - 100K

Does the pension borrow 50K, pay me £150 plus CGT and stamp duty.
Also, do I get tax relief on the £150K?

Thx in advance :think:

Wings

Firstly, I am not a financial adviser, but having a family member working within one of the top 5 UK's Tax Consultants would offer the following advice.

Whilst the rules will be rewritten for Personal Pensions, I believe those rules are far too complex, and therefore at this point in time it is a case of wait and see, particularly for the Chancellor’s next budget on any changes in Inheritance Tax, and the distinct possibility that SIPPS will avoid the same when rolled over for the deceases dependants.

However, in stating the above, if your intentions are to use funds from surrendering a Personal Pension Fund, then since the same can take months to get surrender values, then that exercise should start ASAP. Also one should start the search for a SIPP provider, one with expertise and a track record in the property market, their charges for doing the same, and that provider should be prepared to be a trustee for the scheme.

From April the big changes will be that residential properties can be included in SIPPS, not only Buy to Let poperties, but also holiday homes both in the UK and abroad, and one’s own residential home, although the latter to comply one would have to charge all occupants (including the owner) a rent.

Buy to Let properties are at present subject to the buyer finding a deposit of 25% of the markets value, under SIPPS one would be required to find more than 50% of the market value as a deposit, and in practice a taxpayer will receive up to 40% tax relief, so a property purchased for £100,000 will cost the taxpayer £60,000. All rents received will be subjected to a 100% tax relief, there would be no capital gains on properties held in the pension scheme, and as I stated above, and if confirmed by that nice man in No. 11 could be free of all Inheritance Tax. All this, plus the additional advantage that property in the fund can after April be sold out of the scheme at market/commercial value.

Lastly, all individual investors should wait and see, progress with caution and ensure they take advantage of professional advice.

dunstonh

one should start the search for a SIPP provider, one with expertise and a track record in the property market

What would be your criteria for finding a provider with a track record for something that doesnt get introduced until next April?

Wings

dunstonh wrote:

What would be your criteria for finding a provider with a track record for something that doesnt get introduced until next April?

There are many providers that have been handling investments in property portfolios for many years, both residential and commercial, and therefore can provide a track record of the same.

anniew

Hello Wings, and thanks that your 1st few posts are such helpful ones!
I have a query regarding the property part of a SIPP - I own a 2nd property (mortgage free) which I am considering putting into a SIPP. Normally I would have expected to pay CGT when/if I sold it, but if I transfer it into a SIPP, will this then wipe out the CGT?
I have some info on SIPPS which states "you will be able to sell existing properties to your pension fund, however you may be liable to pay CGT on any profits" Frankly, I am not clear what this means.......
Any ideas?
Thanks

dunstonh

There are many providers that have been handling investments in property portfolios for many years, both residential and commercial, and therefore can provide a track record of the same.

The administration handling residential properties is unknown at this stage. Commercial is one thing but residential is going to be so much different.

Normally I would have expected to pay CGT when/if I sold it, but if I transfer it into a SIPP, will this then wipe out the CGT?

No. You will be selling the property to the SIPP at market rates and will pay CGT as appropriate. You cannot transfer it and you will cease to own it.

The residential properties in SIPPS is a bit over hyped at present. A lot is still unknown. There have been a few threads in the last month which you may find useful to refer to for more information.

Pal

I agree that residential property in SIPPS is hugely overhyped, especially by SIPP providers and estate agents! In particular the possibility of putting your own home in your SIPP makes very little sense.

I suggest that people wait until after April to see exactly what the rules are and what products are being offered before considering this option further.

EdInvestor

Pal wrote:

In particular the possibility of putting your own home in your SIPP makes very little sense.I suggest that people wait until after April to see exactly what the rules are and what products are being offered before considering this option further.

Entirely agree.