Residential Property Sipps - Sipps Pension Guide

Residential Properties Sipp

Investing your pension money into residential property will become a whole lot easier from April 2006. From this date it will be possible to run your property portfolio or holiday home through a SIPP Pension (Self Invested Personal Pension).

This way of owning property will be far more tax efficient than the current system and for the first time, gives the UK public complete freedom to plan for their own retirement. The main advantages of owning a residential property through a SIPP is that the assets are free of any tax and you will receive the usual tax relief on any contributions that you make to SIPP Property Pension Fund.

Under the current set up with buy to let properties any investments you make in residential property are made with income you have already paid tax on and you are then taxed on any gains in the value of the property .

You are able to use a SIPP to buy a residential property from April 6th 2006 and if you already own a second home there is a way of bringing that property under the SIPP umbrella.

Two of the main advantages that I can see for owning a property through a SIPP are the fact that you can obtain mortgages to help you buy the property and you are free to use the property as you wish. Raising a mortgage with a SIPP Pension means that you can buy bigger and better properties by borrowing up to 50% of the value of your fund.

As an example: If your SIPP Pension has an asset value of 100,000 you can borrow a further 50,000 and purchase a property at 150,000. It is also possible to pool resources with other SIPP Pension Funds in order to invest even larger sums into Residential Property.

Using the property as you wish also has its advantages, especially if you have always dreamed of owning a holiday home in the sun. There are certain restrictions and rules but this really does make investing in the overseas property market a definite possibility for many people. The only restrictions and rules about you staying in your holiday home is that you have to pay the market rent for the property during your occupation, but this is hardly restrictive.

All in all we expect the changes that allow people to invest in property through a SIPP Pension to have a large impact on both the home and overseas property markets.