Fiona Murphy asks: What will the government's consultation on allowing pension investment in residential property mean for the SIPP and SSAS industry?
This year’s Budget revealed few surprises. However, one interesting development, which can radically affect SIPPs, was buried in accompanying documents.
“The government will explore with interested parties whether the conversion of unused space in commercial properties in high streets and town centres to residential use could be encouraged by amending Investment Regulated Pensions Schemes rules. Any amendments would need to be consistent with sound public ﬁnances and the government’s wider pension strategy,” Budget documents said.
While residential properties such as family homes are not allowed in a SIPP or SSAS, there are some exceptions to the rule. They blur the boundaries between being commercial entities and places of residence. Examples include nursing homes, student halls and accommodation accompanying employment. In addition to that, there are stringent rules in place to ensure the SIPP investor, or any connected parties such as a spouse or children do not benefit from such a property investment.
The debate on whether a personal pension should hold residential property has raged since 2005 when the then chancellor Gordon Brown u-turned on plans to include residential properties in SIPPs. So, what do pension experts think?
Reinvigorating pensions and town centres?
Barnett Waddingham partner Andrew Roberts is in favour of the proposals.
He says: “Opening up pension investment rules to allow commercial properties to be developed into residential would reduce unnecessary red tape that plagues such projects at the moment (current rules require SIPPs to sell on developments before they become habitable) and so would be good for the property and pension sector.”
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