This article appeared in the Yorkshire Post on Saturday 27th May 2006.

Glimmer of Hope for Investors After Pensions Disappointment

Jeremy Gibbs G&E Wealth Management Consultant

For many, the new pensions legislation introduced 6 th April 2006 (A-Day) arrived with more of a whimper than a bang. The exclusion of the ability to purchase residential or overseas property directly, coupled with reduced borrowing limits, has dampened the hopes of many potential investors.

But as the adage goes, every dark cloud does have a silver lining. The relaxation of previous rules does create a number of opportunities for those intent of investing in, or expanding their property portfolio.

Almost unannounced was the ability of pension funds to hold residential property via syndicated property investment schemes. These syndicates are offered by property management groups who gather investors funds and use the collective value to purchase property assets. Several syndicates are already offering residential property schemes, such as apartment blocks, to their clients for as little as a £25,000 stake. By using your pension fund, you can own a stake in the investment and enjoy the tax benefits of no tax on any rental income or growth in the value of the asset. Whilst specialist in their nature, syndicates still offer the potential to enjoy exposure to the residential market with your pension fund and are likely to become more widespread in the coming years.

Another significant change is that pension funds could previously only buy or sell assets to an ‘unconnected third party’ thereby excluding purchases or sales to yourself, family and sometimes your business. These rules no longer apply. In other words you can buy or sell a commercial property to your own pension fund. A very useful feature if you want to release the capital from a property asset without selling to a third party.

This new measure can also be utilised to tackle the restricted borrowing rules. Under the new rules your pension could buy a share of a property with the remainder being purchased by yourself or a relative. For example, if you wanted to buy a commercial property for £400,000, your pension fund could invest £100,000 and you the remainder. Your pension fund would own 25% of the property and receive 25% of the rental income and 25% of the value on sale.

For any assistance in considering property investments for your pension or simply to discuss your options, then please contact Jeremy Gibbs of G&E Wealth Management Limited. G&E Wealth Management has offices in Leeds (telephone 0113 273 9600) and York (01904 464100). Jeremy can be contacted at the York office, or by email to jgibbs@garbutt-elliott.co.uk.

G&E Wealth Management Limited is a joint venture company regulated and authorised by the Financial Services Authority.