Well, the pensions industry had been going bananas over the prospect of being able to hold property (and other assets) within a Self Invested Personal Pension when the regulation changes on A-Day, 6th April, next year.
But it now seems like the government, in a last-minute U-turn noted in its pre-Budget report, has now shut the door to these types of schemes. So no residential property, wine or racehorses will be allowed into your pension pot. Well, it would seem that way, although the BBC is suggesting that there may still be the ability to hold property in your SIPP:
The new tax rules for residential property bought through a SIPP will be rather different, although not totally prohibitive of using the pension to buy residential property. A Treasury spokesman explained that money put into a SIPP would still attract tax relief. But if the cash was used to buy a house or flat then a 40% tax bill would be slapped on it. Once inside the SIPP, the property would then, as before, escape capital gains tax, and there would be no income tax to pay on any rent from tenants.
This will be a very surprising announcement to many pension companies and also property developers who were hoping for a boom in sales from people looking to take advantage of the new rules.
There is more coverage of this can be found at the BBC, the FT and the Scotsman.
My initial thoughts of the scheme were that the added flexibility it gave people with regards to their pensions was a good thing. But the more I read about it, the more it seemed that it would only benefit those that already had large pension pots built up, and wouldn’t do anything to solve the main pension problem we have, which is getting the vast majority of the population to invest in a pension in the first place.