Allowing SIPP investment in residential property could boost the flagging housing market and prevent a recession, a financial adviser says.
Bankfield Financial Advisers, based in Leicester, has written to Prime Minister Gordon Brown arguing new legislation allowing protected rights in SIPPs could be the saviour of the struggling mortgage industry.
It argues the legislation will free up additional funds which could be invested in residential property providing it with “immediate stabilisation”.
Currently SIPPs are able to invest in commercial property and Bankfield says they should also be able to purchase residential property for a period of five years, after which a review should be made.
Naren Naik, Bankfield managing director, says: “Raising the borrowing level from 50% to 75% would enable many more thousands of people with modest pensions to participate and benefit, as property prices have stalled, and in many areas, declined, this is the ideal time to purchase.”
Bankfield says the move would also be at negligible cost to both the Government and the taxpayer.
Zurich has hailed the ability for SIPPs to accept protected rights funds from 1 October as ‘B-Day’, arguing it will create the biggest pensions opportunity since simplification in April two years ago.
Previously protected rights - funds built up from National Insurance rebates when contracting out of the State Second Pension -could only be transferred to a stakeholder or other appropriate personal pension.
It is estimated there is around £90-100bn of protected rights is in the market, mostly tied up in insurance companies and often in closed funds.
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