At present, except in very limited circumstances, neither SIPPs (Self-Invested Personal Pensions) nor SSASs (Small-Self Administered Schemes) can invest directly into residential property.
Residential property in SIPPs?
In his last Budget, just a few months ago, Chancellor George Osborne indicated a review would take place, to investigate the possibility of self-invested pensions being able to directly own residential property, which resulted from a commercial conversion.
The idea received a mixed response at the time, with some SIPP providers nervous it would open the flood gates to allowing buy to let properties in SIPPs. Whilst other saw it as a progressive step, which would increase the housing stock and make it easier for people to get onto the housing ladder.
However, since the Budget, the Treasury has remained remarkably silent on the subject. Now, Xafinity, a leading SIPP and SSAS provider, has called for the “necessary legislation to be developed at pace”.
Xafinity point out that one in eight shops currently lies empty and that by allowing self-invested pensions to convert these into homes, high streets could be “rejuvenated”, at a time when the Government is coming under ever increasing pressure to solve the housing shortfall.
Xafinity believe there are also other benefits to our high streets becoming areas of mix use property. For example, there is evidence retail districts, which contain some residential property, suffer from lower rates of crime.
Andy Bowsher, Director of Self-Invested Pensions at Xafinity, said: “UK high streets need investment support and a new usage strategy to survive. There is no single solution to this problem; however it is perhaps naïve to think that we will get back to full retail occupancy ever again. Retail properties may not be seen as good investment opportunities and existing owners are unlikely to receive financial support to develop them, a catch 22 situation. Property SIPP & SSAS could be an excellent way to bring investment to the high street, but the legislation must change to allow pension scheme members to invest more widely in residential property. With foresight we could see real benefits from a mixed usage strategy.” (Source: Xafinity)
Only time will tell whether George Osborne’s announcement in the Budget will ever be implemented in any meaningful way, or whether it will be kicked into the long grass as was Nick Clegg’s announcement that parents would be able to use their pensions to help meet the cost of higher education for their children.