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SIPP changes could lead to abuse

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10/09/2012
A pensions specialist is challenging calls from a Conservative councillor to lifts restrictions on residential property investment in SIPPs, stating some issues must be "carefully thrashed out" first.

Lisa Webster, a technical consultant at Hornbuckle Mitchell, said the move, proposed by councillor John Moss last week, could be a risk for some investors.

Writing on the ConservativeHome website, Moss – who co-authored a report titled ‘Principles for Social Housing Reform’ in 2009 – said that allowing SIPP savers to invest in residential property would boost the rental housing market.

Although Webster accepts that allowing the residential property investment could boost pension savings, she said there are many grey areas that would “need to be carefully thrashed out” before the restrictions are lifted.

She said: “John Moss mentions on the website that limiting investment to ‘newly-built property’ would fillip the housing sector, but that this would require greater definition. Would this include a house that is two years old but has remained empty or one that has been recently renovated?”

“A further area of concern would be personal use, especially with property bought for holiday lets. It would be extremely difficult to vet the use of these properties, and I believe there’s much scope for misuse.

“Opening up the SIPP market to residential property would likely result in many pension investors placing a large proportion of their pension pot into a property which could prove a risky move if their home is their main non-pension asset.

“There are many areas that need to be carefully thought through before this wish could become a reality,” she added. 

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