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IFA uses Tax Act to invest pensions in residential property

Midlands IFA Central Financial Planning says a section of the Income & Corporation Taxes Act 1988 has allowed it to develop an approved company pension scheme that can invest in residential property.

The self-invested benefit arrangement allows company directors to receive normal pension tax reliefs on their contributions but invest without any restrictions.

The Inland Revenue has mooted making investment in residential property available for all pension schemes from 2005 but CFP says it has been available as an asset class since the 1988 Act came in as long as the rules are followed.

It says the Revenue has no direct say in the choice of investments provided they are prudent under trust law for schemes set up under the Act.

CPF provides an independent trustee to run the scheme and ensure it does not fall foul of the Revenue, which requires schemes to be run for the sole purpose of providing income in retirement.

The IFA says the scheme is not suitable for all investors as death benefits are more restrictive than most schemes. As each scheme has to be set up individually on a fee basis, it will typically only be worthwhile for transfer values or single premiums over £100,000.

Director Ian Smith says: “We have spoken to the Revenue about using residential property where we see great demand and they are happy with this as long as it is a third-party tenant.”

Winterthur Life pensions strategy manager Mike Morrison says: “If the opportunity was that big, why has it only been raised at a time when it is being mentioned in the pension simplification review?”

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