Teather & Greenwood has created an exempt unit trust that enables self-invested personal pensions (Sipps) and small self-administered schemes (SSAS) to invest indirectly in residential property.
Property Investment for Pensions will invest in a portfolio of around 250 furnished properties in London and the surrounding suburbs. These areas were chosen because rental yields tend to be higher than other regions and capital value is higher The properties will be let on short-term tenancies of around six months to professional people whose rent is often paid for by their companies.
Although the Inland Revenue does not allow residential property as an investment for Sipps and SSASs, this trust circumvents the rules. As it is listed on the Alternative investment market, Sipps and SSASs will be investing in shares rather than directly in residential properties.
The property portfolio will be managed on Teather & Greenwood's behalf by Invest-in-Property, which has specialised in managing residential property portfolios since 1989. Its chairman, Andrew Reeves, spent five years working for the Association of Residential Letting Agents and helped to devise the buy-to-let scheme.
Invest-In-Property will look for one and two-bedroom properties, with average values of £250 in central London and £140,000 in the suburbs. Factors such as rental yield and capital appreciation will be assessed and the portfolio can also be geared by up to 70 per cent.
This product is unusual, as most property investments aimed at the pensions market invest in commercial property. However, some IFAs doubt the suitability of residential property to the pensions because rental yield is unpredictable and tenants are not tied to long-terms leases as they are in the commercial sector.
Malcolm Coury, director at IFA firm Money Wise, says residential property has historically performed well but points out that there are predictions that the bubble is about to burst.