sipps-anyone got a crystal ball?

You can invest in commercial property at the moment, and most with profits funds do. What is changing is that you will now be able to invest in residential property, including your own house.

If there is a lot more money available to buy residential property, this would normally push prices up. Whether or not it does depends on how many people move their pension funds into residential property. If the market has recently collapsed, then I don't think this would help it recover.

A noticeable increase in asking prices for investment type property. A negligible increase in sale prices.

Daytona

I'm trying to get my head around the idea of putting your own house into a SIPP.

Does this mean you could sell your house to your SIPP, thereby getting full tax relief on the purchase of your house?? There must be something in the rules to stop this, surely?

I understand you'd then have to pay a market rent to live in your own house - but this is paid into the SIPP so you are only really paying yourself. Also, if you lost your job you'd presumably be able to claiming housing benefit, since you are renting!

Think about this a bit more - there's probably no advantage to putting your own house into a SIPP - since you would have the pay the SIPP a market rent which

*wouldn't* be tax deductable on your personal income. Plus there'd be load of administrative fees etc, and probably stamp duty etc. when you sell to the SIPP. Seems a completely stupid idea thinking about it properly.

In message , Andy Pandy writes

I thought you couldnt put your own residence in your SIPP??

Apparently you can but I doubt it makes sense unless:

a) You expect house prices to plummet, or

b) You think you may lose your job and need to claim housing benefit (assuming there is no rule saying you can't get HB in this circumstance).

It seems that you can, subject to the above restriction. The HB scam apart, the economics of the transiction are not positive.

tim

In message , Richard Faulkner writes

You cant, but you will be able to.

Only the fact that you wouldn't get tax relief on the rent.

You can't get housing benefit for a house rented from a relative, this may extend to a house rented from your own SIPP.

Also, when you retire and want to take benefits from the scheme, having the house in there will cause problems.

Either you leave the house in there, if compulsory purchase annuities are abolished, and rent from the SIPP using taxable pension income, or the SIPP would have to sell the house and you would be left making other arrangements for where to live.

X-No-Archive: yes In message , Andy Pandy writes

To say nothing of having to sell your house to buy an annuity!

I've been thinking about this a bit. As I'm a first-time buyer, I wouldn't have any fees to pay that I wouldn't have in buying anyway. So let's say I want a 300,000 house. I put up 180,000 in cash and with 40% tax-relief I have 300,000 to buy the house into the SIPP (plus I'm down a few thousand on the transfer costs).

Now I need to pay a market rent into the SIPP. Let's call it 5% making it 15,000 per annum. I pay that out of taxed income over 20 years for a total of 300,000.

Then I retire. What happens then? Could I just leave the house in the SIPP and quit paying the rent, using the accumulated cash and a reversionary mortgage on the house in the SIPP for income?

The main downside to me seems to be that while I get tax relief on 300 grand to buy the house, I then lose tax relief on the 300 grand I put into the pension in lieu of rent whereas I'd get that tax relief on any other pension scheme. Thus I'm no better off.

That's not to say it wouldn't work buying the house immdeiately before retirement...

There's something else I vaguely remember about a 215,000 Pounds limit. Does anyone know what this is?

FoFP

I'm probably missing the obvious here, but how would it help in that case to have the house in your SIPP?

FoFP

You'd effectively get tax relief on the lost equity. If your house price goes down then your net worth has gone down by that amount. If your SIPP goes down you could restore its value by adding a much lesser net amount as the contribution will get grossed up.

As an example, you have 200,000 sat in your SIPP invested in shares/cash/whatever. You have a house worth 200,000 which you own outright. You think house prices will plummet but like your house and want to carry on living in it.

If your house price plummets to 100,000 then you'd have a 100,000 house and still 200,000 in your SIPP.

But if before this, you sell the house to your SIPP for 200,000, the SIPP then has a 200,000 house and nothing else. You have 200,000 in cash in your back pocket.

The house price then plummets to 100,000. You then buy the house back off the SIPP for 100,000. The SIPP is now only worth 100,000, but you have the house plus 100,000 left in your back pocket. You can then use 60,000 of this to plough back into your SIPP (perhaps over a few years to get full 40% relief), making the SIPP back up to 200,000.

So you end up with a 100,000 house you own and a SIPP worth 200,000, exactly as if you hadn't sold it to the SIPP, *but also* with 40,000 left in your back pocket!

Obviously this ignores dealing costs, regulatory costs etc.

I think what it boils down to is basically this:

Is the house a good BTL investment? If yes, then you will be worse off putting it into the SIPP. If no, then you could be better off but you'll need to account for transfer and administration costs (I believe the house needs to be professionally valued every year!).

The logic behind this is that if the SIPP is making money by renting to you, then you are (net) paying taxed income into the SIPP - which will then be taxed

*again* when you eventually draw the benefits off the SIPP.

OTOH, if the SIPP is losing money by renting to you, then you are (net) drawing tax free income out of the SIPP.

So if you didn't have to pay the SIPP a market rent for living in the house then it would be a no-brainer to do it.

Not really because you'd have to pay rent for as long as you live in it.

I think your pensions in total can't increase by more than this amount per year (from April 2006).

This is the new annual pension contribution limit for 2006-07 - namely 100% of Earnings up to 215,000 (rising each year to 255,000 in 2010-11).

There is also a lifetime limit of 1.5 million, rising to 1.8 million in

2010-11.

"Andy Pandy" wrote

Yes, OK ...

"Andy Pandy" wrote

Not if you are already paying maximum contributions to your SIPP!

Thus, it will only work if you have spare "unused" contributions allowable into the pension. If you are already paying the most that you can which will still get tax relief (related to earnings), then you wouldn't have any advantage by selling house to SIPP then buying it back when it's cheaper.

From next April the maximum is 100% of earnings! I doubt too many people would be paying that much. You won't of course get 40% tax relief if you contribute earning below your 40% band - but you could feed it in over a number of years.