Sweeping changes to pension legislation coming into force in 2006 will mean that residential property will be allowed to be placed in a pension, which has led many to predict a major boost for self-invested pensions coupled with an upturn in the buy-to-let sector.
But IFAs at Sofa’s last annual conference before the body merges into the Personal Finance Society are predicting that problems are definitely going to emerge.
Speaking at a panel session at the Birmingham conference about developments in pension products after simplification, Sofa board director Phil McGovern pointed to the danger of jumping on the buy-to-let bandwagon.
He believes that the Government sees buy to let as a way to attract people into saving for a pension and a solution to the retirement savings problem.
But he does not think that buy to let will be the panacea of saving and predicts that the FSA is going to have to spend a lot of resources sorting out the problems that will arise when property is placed into pensions, particularly if the housing market continues to go downhill.
McGovern was backed up at the conference by Sofa managing director Bob Bullivant, who said that it is best for a pension to consist of liquid assets and BTL properties could cause problems.
One IFA called on product providers to refuse to allow property to be placed in a pension to avoid claims of misselling.
McGovern said: “Property in a pension is going to be a nightmare – problems are going to appear and the regulator is going to have to spend an awful lot of time sorting this out.”