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Sipps give cautious welcome to residential conversion investment proposal

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Sipp providers have cautiously welcomed Government proposals to allow pension funds to invest in commercial property that is converted for residential use.

However experts have warned policymakers any new rules will need to be “tightly drawn” to prevent abuse by investors.

Last week’s Budget revealed the Government is considering changing investment rules so pension money can be used to convert commercial properties for residential use as part of efforts to reinvigorate Britain’s high streets.

Suffolk Life head of marketing Greg Kingston says: “The Government already said no to residential property outright in 2005 and I do not think there is any appetite to return to that.

“We still need more detail on how this will work and there is a question about whether or not you will be able to keep the property in your Sipp once it becomes residential. But if this can be made to work I think Sipp providers will embrace it.”

James Hay head of technical support Neil MacGillivray says: “In theory this sounds like a good idea but given the complexity that surrounds commercial property investments it is not clear how it will work.

“There is also the risk it will be abused and if the Government wants to protect against that the whole thing could become so restrictive and complex that it will be a non starter.”

Dentons Pension Management director of technical services Martin Tilley says: “Any proposals and subsequent legislation would need to be tightly drawn to prevent misinterpretation and potential abuse by occupation of parties connected with the pension member.

“It is surprising that the Government is looking to widen the investment opportunities with self invested pensions at the same time that the FSA is looking to ensure inappropriate assets are not accepted into the pensions regime.”

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  1. This is a good idea.

    Why should’nt, for example a family or business group pool their SIPP assets and convert a run down row of shops into homes or into student flats?

    Many low cost SIPP providers, IFAs and fund managers will have a vested interest in putting the kybosh on this.

    Their business models are based on assets under management and they won’t like the idea of hundreds of SIPP members moving off their platforms and into residential property.

    We need lots more social housing and large occupational schemes and SIPPs could provide it.

    Why can’t NEST offer a fund investing in residential property?

    And why not whilst we are about it return SIPP borrowing limits to pre-A Day terms? This would really help to encourage SIPPs into commercial and residential property.

    As for connected parties renting, why not, provided an independently valued commercial rent is paid. The rules could state that an independent rent valuation be conducted say every 3 years and that the SIPP provider must report to HMRC that such level of rent has been received.

    HMRC should allow this good idea.

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