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Special delivery

At first sight, you may think it is madness to offer a house-price-linked plan at this stage in the housing market cycle. However, once you have got to grips with the concept and its potential uses, the new Abbey plan stacks up well.

It has an investment term of 10 years and on maturity aims to deliver a full repayment of capital (even if house prices fall) together with double any growth in the Halifax house price index, so double the upside with none of the downside. The minimum investment level is just 3,000.

It could have many uses such as investing on behalf of children/grandchildren but perhaps the most interesting use is as a much lower-risk alternative to a physical buy-to-let investment.

Although you will not achieve the same level of gearing as you could with a heavily mortgaged property, you equally will not have the same costs or risks. There are no tenants to find, no stamp duty to pay, no legal fees, no ongoing management and there is no chance of negative equity.

Because it can be held in a Sipp now, there is no need to wait for A-Day to get exposure through pensions to residential property returns. Products such as this could be the answer to the growing concerns about misselling of BTL schemes to Sipp investors after A-Day.

For anybody who wants a link to the long-term growth potential of house prices, but does not want the risks and hassles associated with an actual bricks and mortar investment, the Abbey plan could fit the bill and even though returns over the next 10 years are likely to be much more modest than we have seen over the past 10 years, an investor can at least expect to receive double whatever the market does deliver.

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