It's a wonderful scheme...IF you are already wealthy or already have a large pension pot. The rules are complicated and exhaustive. Basically you have to have a SIPP, self invested personal pension which is a personal pension plan that allows a lot of flexibility as to where the pension funds are invested. Most Sipps have a very high initial investment limit, 100K is not unusual. They are also subject to high management and annual charges.

The way it will work is this. From 6 April 2006, investors can buy a new property from existing funds in their Sipp or by using their annual contribution limit (set at the lower of £215,000 or their earnings for 2006/07). The property could be one they already own as a buy-to-let or holiday home, for instance - although there would be fees to pay such as stamp duty, land tax and conveyancing costs. The Sipp will be able to borrow up to 50 per cent of its assets, so if the Sipp has £200,000 in it, it could borrow another £100,000. This borrowing could be used to help buy the property, and the loan interest and repayments would be costs of the Sipp. Users of the property (whether buy-to-let tenants or the Sipp-plan holder living in his or her own home or visiting a holiday home) need to pay a commercial rent. The rental goes into the Sipp as non-taxable income.

If the Sipp holder uses their own property they will have to pay a commercial rent otherwise they forfeit their tax advantages.

For more information on how the scheme will work see http://www.informedchoice.ltd.uk/

In the short term I cannot see it having much effect on house prices in the UK or abroad. In the long term, I think if the government were seeing their scheme being taken advantage of and it having a negative effect on markets, then they would probably withdraw the scheme.

It really is for the rich at present but then they already get all the tax breaks so what is one more?

Yes I agree it is not as great as it sounds at all. Read the print and see it is restrictive also. Stuart

Hi magster,this is a post that i am very intrested in and will post more about tomorow but in meantime how sure are you that you can add property alreay owend into the fun.
Stephen .

Yes, Stephen you can. However as I pointed out there are charges, surveyors fees, solicitors fees and stamp duty to consider because the ownership of the property is changing from yourself to the Sipp. If you don't believe me check out HMRC's web site and the one I have a link for!

Hi Magster, the reason I was asking was not that I did not belive you it was that I had a meeting with an IFA last week regarding land that I bought in the Bahamas and wanted to develop on,I wanted to put the whole thing into the sipp along with enough money to allow me to borrow the rest through the fund but he said that if the land was already in my name then the pension could not buy it.What he is saying is that the land would have to have been bought from the start with the fund but if what you are saying is right then that is great news for me.He said somthing else that you said and that was that he thought it would get scrapped after a few years when the goverment relized how much revenue that they are loosing.I will have a look at the web site.
Thanks, Stephen.

There was a very good article in last weeks Sunday Times money section.
http://business.timesonline.co.uk/article/0,,9560-1752958_1,00.html

Sorry folks, there is an error in my large post above. The new rules will come in on 6 April 2007 and not 2006. Sorry for the confusion.

Stephen, you cannot transfer it at present but you will be able to from 6 April 2007 providing all the conditions are met. I suspect that many financial advisers have not yet received their training in the new rules. I suggest that you get good advice from a decent qualified accountant who has investment qualifications. Not all IFA are au fait with tax law. It is always worth getting a second opinion.

The new rules come in April 2006

As for the holiday home how would the fund or the tax man know if say I where to use it myself for holidays,is that down to me to declare .

Stephen, as with all things it is up to you to be honest and declare such a thing. You may get away without declaring but making a false declaration is not something that you would be advised to do. Firstly checks are made albeit on a random basis. Secondly, investigations these days are much more random than they used to be and if you are investigated it will cost you a lot more than a commercial rent on a holiday property. Thirdly, your adviser if they know you are using the property for personal purposes, is duty bound under the new laws introduced last year, to advise the authorities otherwise they risk their own professional practice.

Sorry folks I am having a few too many senior moments today, tiredness I think. It is 2006 not 2007. For some reason I was thinking we were already in 2006! Doesn't make me look very professional!!

......another point that I would like some clarification about is whether these future changes would affect existing arrangements or just apply to new purchases made from the introduction date.
In my own case I am already receiving an occupational pension, already have a second property in the u.k, that has been rented out for six years, and already have a third property, our apartment in Tenerife, also rented out for holiday lets.

They are all owned outright, along with my main residence ; I am just wondering if there would be any benefit at all to me with these changes.....

I'm not able to offer personal advice, all I do is point out the generalities and point people in the right direction. This is because one cannot possibly know everything that there is to know about a persons affairs unless they are examined properly. Incorrect advice because a pertinent point has not been shared is worse that no advice at all.

The only way to ascertain whether a course of action etc is beneficial to an individual or not, is to consult with an adviser and ensure that a second opinion is sought. It costs money if done properly but is worth it.

Does anyone know of a web site that gives you all the rules,I have spent the best part of today serching including HMCE but only getting little bits on each site.
Stephen.

Hi Guys

This subject is of interest to me.

My partner & I are planning to partner in a property development in Turkey this winter, due for completion end March / begining April 2006. We were planning on buying one of the properties ourselves offplan, but if I could use my pension fund (by putting my existing fund into a SIPP ? could this be done ?) & borrowing a further 50%, then we could perhaps buy a further 2 properties. Presumably we could we buy offplan but not actually buy the property until after 6th June ?

Regards
Pete & Lorraine

Edited to remove unauthorised personal signature/weblink
David HT Mod

Here's a few links. Find more yourelves by putting 'Sipp' into google.uk. Lots of reading to do but could I emphasise once again that this is a complicated business and you do need expert advice.

http://www.guardian.co.uk/guardian_jobs_and_money/story/0,,1395647,00.html#article_continue

http://www.sipp-provider-group.org.uk/

http://www.trustnet.com/help/sipp/

http://www.iii.i-sipp.com/

Thanks Magster, i'm looking forward to tucking in to all this information tomorow.
Stephen.

I recommend you speak to an IFA, bear in mind you are likely to be charged an hourly rate for any advice. Remember it's a complicated subject, and already there have been a number of different views posted. But the subject is much more complicated than you think. As is usual with changes in government legislation there are always plus's and minus's.
This site may help
http://www.aifa.net/
As an IFA myself I could not offer advice over the forums.
My personal opinion is that property prices in the short to medium term would not be unduly affected.