Sipps
I'm sorry, Silver. I forgot I even posted that. I couldn't sleep at the time and I was grumpy. I had just read an article in the Scotsman which said that the companies selling SIPPs would not be regulated which seems rather silly to me.silver wrote:Can we have the full version of this..when you have time...
I wouldn't want to expand on anything because I'm not an expert but I really dislike the people who mis-sell financial products. If they were muggers they would traumatise their victims for a few months and take a few quid from their wallets but some IFAs have had a much worse effect on people's lives
Very good JohnP, you must go down a storm at parties.jpinks wrote:Self investing ?? You mean I don't have to invest - it does it itself??? Sound too good to be true!! Where's that wine?
The British government is trying to encourage it's citizens to invest in their pension and as such are widening the scope of a scheme which allows British citizens to decide for themselves into which asset class they will invest their money.
From April 2006 that asset class will probably include buy to let property including that abroad and the fear is that some unscrupoulous people may take advantage of the change in the rules to entice people who do not qualify to open a SIPP to buy Spanish property. I suspect that this will result in a short term boost to the Spanish property market but in the long term have a detrimental effect.
You being a professional, John, I would imagine that you would look up SIPPs and then engage in a debate, I'd like that, or you could just choose to look smug.
Around my way sales people have started to talk about how the market is going to take off because of SIPPs. I believe that some sales people will suggest that it's best to sign the contract right now when the property is available and arrange your SIPPs scheme later. As you say, when it comes to arranging the SIPP, people will discover that they can't buy the property through their SIPP and that is why, in my opinion, in the short term it will give a boost to the property market but in the long term it may destroy it as too many people have off plan property that they are desperate to sell
SIPPs
If anyone's got any reliable - serious - professional - information, could they let me know, please. Or even a recommendation of an IFA that does truly know something (as compared with feeble speculation).
Seems like this subject is going to become important, maybe it already is, but that right now nobody knows zip (as the Americans say). Field wide open for shysters.
Seems like this subject is going to become important, maybe it already is, but that right now nobody knows zip (as the Americans say). Field wide open for shysters.
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barracuda5
- Tourist
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The buying of a proerty thru a SIPP is basically all hype to get people to regenerate the property market whether in the UK or abroad, many, many people will not be able to do so.
There are strict rules in raltion to the amount of money avaialble to buy a property.
For example let us say a property valued at £150,000 is being considered as a rental property.
The minimum pension fund value would need to be £100,000 and this would allow you to borrow a further maximum of 50% of the fund. Another £50,000. This would mean being fully exposed to a single asset class in the pension fund and probably regarded as a higher risk investment.
All rent would be paid into the pension plan as contributions, the pension fund owns the property, the rents musts be at market value, if you have no tenenats who pays the rent which in turn pays the mortgage. It could be that you then have to pay the contribution or at the very worst sell the property at whatever price to repay the mortgage.
I f it is a holiday home and you wish to take holidays there you must pay a fit and appropriate rent or you will be taxed on it at 40% as benefits in kind.
What will the tax implications be if for instance the property is in Spain in relation to Capital Gains Tax.
You could place the property into the SIPP as a single contribution, however, if the purchase price is £150,000 with tax relief this will make the gross contribution £192.308.00 and you will need, under the new post April 2006 contribution rules, to have a salary of at least £192,308.00.
I can assure you that SIPPs are likely to be the way forward in relation to retirement planning, however, as far as property purchase is concerned there are few IFAs at present who are actively promoting this because of the pitfalls, you will find that in the main it is promotion by estate agents pushing it forward.
There are strict rules in raltion to the amount of money avaialble to buy a property.
For example let us say a property valued at £150,000 is being considered as a rental property.
The minimum pension fund value would need to be £100,000 and this would allow you to borrow a further maximum of 50% of the fund. Another £50,000. This would mean being fully exposed to a single asset class in the pension fund and probably regarded as a higher risk investment.
All rent would be paid into the pension plan as contributions, the pension fund owns the property, the rents musts be at market value, if you have no tenenats who pays the rent which in turn pays the mortgage. It could be that you then have to pay the contribution or at the very worst sell the property at whatever price to repay the mortgage.
I f it is a holiday home and you wish to take holidays there you must pay a fit and appropriate rent or you will be taxed on it at 40% as benefits in kind.
What will the tax implications be if for instance the property is in Spain in relation to Capital Gains Tax.
You could place the property into the SIPP as a single contribution, however, if the purchase price is £150,000 with tax relief this will make the gross contribution £192.308.00 and you will need, under the new post April 2006 contribution rules, to have a salary of at least £192,308.00.
I can assure you that SIPPs are likely to be the way forward in relation to retirement planning, however, as far as property purchase is concerned there are few IFAs at present who are actively promoting this because of the pitfalls, you will find that in the main it is promotion by estate agents pushing it forward.
Has anyone actually seen Estate agents promoting this in Spain? If so what are they saying about the tax liabilities in Spain?
Okay there is loads of hype in the UK to the point of if you don't make a decision by "A" day you could disappear forever down a negative return pension hole. Much hype about the tax gains of buying a property abroad, but zilch about any overseas tax implications.
Personally I think it unlikely that we will see a major boost in property sales in Spain from SIPPS, there are a lot of people crying over their already dwindling funds, surely they will be very careful what steps they take with Sipps? I hope so anyway. And as already pointed out 50% of many people funds is not going to go very far.
I just don't see the Sipps property option as being a good seller.
Okay there is loads of hype in the UK to the point of if you don't make a decision by "A" day you could disappear forever down a negative return pension hole. Much hype about the tax gains of buying a property abroad, but zilch about any overseas tax implications.
Personally I think it unlikely that we will see a major boost in property sales in Spain from SIPPS, there are a lot of people crying over their already dwindling funds, surely they will be very careful what steps they take with Sipps? I hope so anyway. And as already pointed out 50% of many people funds is not going to go very far.
I just don't see the Sipps property option as being a good seller.
I wear it well...........
SIPP popularity
This popularity thing is going to be interesting.
Many people consider pension investments to be poor value compared with the potential from property (I know, I know - but our pension investment payments actually lost us many thousands in value during the first year, never regained, whilst whatever we've put into bricks and mortar has actually made us money). We looked at putting our dosh into a company SIP years ago, but it was too expensive to set up. The possibility of investing for our pension in property, using our own judgement (rather than the Experts ushc as employed by Equitable Life or our expensive and dwindling Endowment Mortgage provider) is very appealing.
Understand the potential pitfalls between what may be possible in the UK, and how that translates - or not - into a Spanish situation. Personally, I hope it all sorts itself out into a workable trustworthy scheme.
Many people consider pension investments to be poor value compared with the potential from property (I know, I know - but our pension investment payments actually lost us many thousands in value during the first year, never regained, whilst whatever we've put into bricks and mortar has actually made us money). We looked at putting our dosh into a company SIP years ago, but it was too expensive to set up. The possibility of investing for our pension in property, using our own judgement (rather than the Experts ushc as employed by Equitable Life or our expensive and dwindling Endowment Mortgage provider) is very appealing.
Understand the potential pitfalls between what may be possible in the UK, and how that translates - or not - into a Spanish situation. Personally, I hope it all sorts itself out into a workable trustworthy scheme.
Re: SIPPs
My point isn't that it is a good or bad investment but that the scheme will be misrepresented to encourage people to place a deposit for which they cannot get a refund. Where I am, Cadiz region, people are begining to salivate about SIPPs and they have a high regard for property developers who they imagine must be very clever if they are in control of a 500 million euro budget.Grehan wrote:If anyone's got any reliable - serious - professional - information, could they let me know, please. Or even a recommendation of an IFA that does truly know something (as compared with feeble speculation).
Seems like this subject is going to become important, maybe it already is, but that right now nobody knows zip (as the Americans say). Field wide open for shysters.
Anyone in charge of a 500 million euro budget project must be responsible, right?
The idea of putting residential. or even buy-to let property, into a SIPP sounds superficially beneficial.
However, it needs to be approached very carefully indeed.
One of the major stumbling blocks to putting Spanish property into a SIPP is the fact that the property is "owned" by the Trustees of the SIPP and Spanish law, as I understand it, does not recognise ownership by trustees. Furthermore, assets held by a pension scheme in the UK )including SIPPs) are effectively tax-free - as regards investment income and Capital growth. This would not be the case in regard to Spanish property.
Be very wary indeed of ANYONE recommending that you put Spanish property into a SIPP. Any advice on starting a SIPP should be provided from within the UK where the advisers are at least regulated.
I may well be transferring my pension assets into a SIPP come 6 April 2006 but there is now way I would consider putting my Spanish holiday home into it as an asset!
Gus
However, it needs to be approached very carefully indeed.
One of the major stumbling blocks to putting Spanish property into a SIPP is the fact that the property is "owned" by the Trustees of the SIPP and Spanish law, as I understand it, does not recognise ownership by trustees. Furthermore, assets held by a pension scheme in the UK )including SIPPs) are effectively tax-free - as regards investment income and Capital growth. This would not be the case in regard to Spanish property.
Be very wary indeed of ANYONE recommending that you put Spanish property into a SIPP. Any advice on starting a SIPP should be provided from within the UK where the advisers are at least regulated.
I may well be transferring my pension assets into a SIPP come 6 April 2006 but there is now way I would consider putting my Spanish holiday home into it as an asset!
Gus
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Beachcomber
- Andalucia Guru
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- Joined: Tue Jun 15, 2004 11:11 pm
- Location: Guadalhorce Valley
I gave these links in a previous thread about this subject:
http://news.bbc.co.uk/1/hi/programmes/i ... 728889.stm
http://news.bbc.co.uk/1/hi/programmes/i ... 727637.stm
http://news.bbc.co.uk/1/hi/programmes/i ... 708593.stm
Anyone considering this would be well advised to listen to the Inside Money programme which can be accessed from the last link.
http://news.bbc.co.uk/1/hi/programmes/i ... 728889.stm
http://news.bbc.co.uk/1/hi/programmes/i ... 727637.stm
http://news.bbc.co.uk/1/hi/programmes/i ... 708593.stm
Anyone considering this would be well advised to listen to the Inside Money programme which can be accessed from the last link.
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hillybilly
- Andalucia Guru
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- Joined: Thu Oct 07, 2004 12:53 am
- Location: Estepa, Sevilla
Interesting snippet at the end of this article re the Spansih position on SIPPS.
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Lorraine - Mijas
- Resident
- Posts: 302
- Joined: Thu May 05, 2005 7:36 pm
Just seen this article on a web site:
THE grey world of pensions is about to get more colourful when the Government introduces a property-based pension that - for the first time - allows savers to invest in property tax-free to provide for their retirement.
Rather than buy stocks and shares with their pension cash, investors will be allowed to buy residential properties instead.
And as with traditional pensions, the Government will both contribute to your fund (and give you 22p for every 78p you invest, more if you are in the 40% income tax bracket) plus offer tax relief on any profits (capital or rental income) that your fund makes from a property.
Any house you buy in the UK can be purchased using your pension, but adding a more exotic place in the sun to your investment fund is problematic.
According to accountants PriceWaterhouseCooper, the number of countries that allow British investors to buy a property through a Self Invested Personal Pension (SIPP) are limited to three: Cyprus, Malta and Mauritius. That's because only these islands, which used to be British colonies and have legal systems similar to ours, allow properties to be owned indirectly as investments or 'unit trusts'.
Few people realise the difference this could make. When property-based SIPPs are introduced in April next year, it is said they will pull in billions of pounds into the property markets of these islands.
'Existing SIPPs are worth around £20bn, but we expect this to increase substantially to £80bn when property-based funds are introduced next April - and a substantial portion of this will be invested in foreign properties,' says Lyn Webster of investment specialist O'Garra.
Of the three countries, the most likely to benefit from this possible investment bonanza will be Cyprus, which is one of the most popular places to buy a home in the sun after Spain and the US, and the most tax-friendly destination to buy a property through a self-invested pension. That's because any rental income you earn from your property investment is not taxed at source.
Cyprus is already booming, so this extra cash pouring in is likely to make it the new Majorca and transform it from the relatively affordable middle-market holiday home destination it is today into a property hotspot.
Prices are already rising by more than 15% a year in areas such as Paphos and Limassol.
And this is what you do
SO HOW do you finance a SIPP property on one of these islands? For example, take this £150,000 newbuild three-bedroom villa for sale in Paphos, Cyprus.
To buy it through a SIPP pension requires the buyer to put down a deposit of £60,000 (to which the Government then adds £40,000 as tax relief). Other expenses (such as solicitor's fees) would add up to about £5,850. Include the tax-free cost of a mortgage over 25 years (£60,000) to pay the balance and the £150,000 villa will really cost £125,850.
Over the 25 years this villa should appreciate in value substantially and can also be rented out to holidaymakers - so the equity (when you sell it) and the rental income all goes back into your pension tax-free.
Like any investment, there are risks involved. The villa may prove difficult to rent out, will require repair work over the years and will also take up time and effort to manage (or you may have to pay an agent to look after it). Also, the property market in Cyprus could crash and you'll end up with a house worth only marginally more than you paid for it. But assuming you are going to own it for 25 years or more, this is a low risk.
So doe's this as suggested mean no one will be buying here ?? or is there a loophole?
THE grey world of pensions is about to get more colourful when the Government introduces a property-based pension that - for the first time - allows savers to invest in property tax-free to provide for their retirement.
Rather than buy stocks and shares with their pension cash, investors will be allowed to buy residential properties instead.
And as with traditional pensions, the Government will both contribute to your fund (and give you 22p for every 78p you invest, more if you are in the 40% income tax bracket) plus offer tax relief on any profits (capital or rental income) that your fund makes from a property.
Any house you buy in the UK can be purchased using your pension, but adding a more exotic place in the sun to your investment fund is problematic.
According to accountants PriceWaterhouseCooper, the number of countries that allow British investors to buy a property through a Self Invested Personal Pension (SIPP) are limited to three: Cyprus, Malta and Mauritius. That's because only these islands, which used to be British colonies and have legal systems similar to ours, allow properties to be owned indirectly as investments or 'unit trusts'.
Few people realise the difference this could make. When property-based SIPPs are introduced in April next year, it is said they will pull in billions of pounds into the property markets of these islands.
'Existing SIPPs are worth around £20bn, but we expect this to increase substantially to £80bn when property-based funds are introduced next April - and a substantial portion of this will be invested in foreign properties,' says Lyn Webster of investment specialist O'Garra.
Of the three countries, the most likely to benefit from this possible investment bonanza will be Cyprus, which is one of the most popular places to buy a home in the sun after Spain and the US, and the most tax-friendly destination to buy a property through a self-invested pension. That's because any rental income you earn from your property investment is not taxed at source.
Cyprus is already booming, so this extra cash pouring in is likely to make it the new Majorca and transform it from the relatively affordable middle-market holiday home destination it is today into a property hotspot.
Prices are already rising by more than 15% a year in areas such as Paphos and Limassol.
And this is what you do
SO HOW do you finance a SIPP property on one of these islands? For example, take this £150,000 newbuild three-bedroom villa for sale in Paphos, Cyprus.
To buy it through a SIPP pension requires the buyer to put down a deposit of £60,000 (to which the Government then adds £40,000 as tax relief). Other expenses (such as solicitor's fees) would add up to about £5,850. Include the tax-free cost of a mortgage over 25 years (£60,000) to pay the balance and the £150,000 villa will really cost £125,850.
Over the 25 years this villa should appreciate in value substantially and can also be rented out to holidaymakers - so the equity (when you sell it) and the rental income all goes back into your pension tax-free.
Like any investment, there are risks involved. The villa may prove difficult to rent out, will require repair work over the years and will also take up time and effort to manage (or you may have to pay an agent to look after it). Also, the property market in Cyprus could crash and you'll end up with a house worth only marginally more than you paid for it. But assuming you are going to own it for 25 years or more, this is a low risk.
So doe's this as suggested mean no one will be buying here ?? or is there a loophole?
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