SIPPS shock as Brown shelves tax loophole for residential property.

Oh.... dear, looks like his cheques are bouncing.

Thanks for a fascinating pointer. Yep, it's all going swimmingly. Next up I expect some hiccups in the credit default swaps markets. Anything major there means it's time to take cover.

FoFP

Obviously 35% of the electorate did not want any of that which was on offer

Didn't want any of them.

It looked like a choice between adolf and uncle joe whoever you voted for. Adolf for nulabnazi, oldtorynazi and libdemslightlynazi or respectstalinist and greenverystalinist

As it's already been pointed out, it's not at all obvious.

35% of the population could easily have not cared who was in power or been happy to let others decide.

tim

10% of sales volume is not the same as 10% of the total property market.

If 10% of the properties in your area were to suddenly come onto your books and those of the other agents in your area, that would probably be a pretty significant increase in the number of properties you had to sell.

Either that or they didn't think it made any real difference who got in.

Or alternatively, if you don't like the candidates on offer, you could always stand as a candidate yourself.

In which case they were the perceptive ones. Anyone spot the difference between Blair and Thatcher?

The crucial similarity is that they both got massive majorities with a minority of the votes.

Thom

This is the strategy of "It you can't beat 'em, join 'em".

FoFP

In fact if one does the calculation of "does the value accrued to me of doing the research to make the correct choice exceed the cost of doing that research?" then I suspect the answer for most people is "no".

FoFP

In message , "tim (moved to sweden)" writes

To paraphrase Yes Prime Minister, 'they don't care who's in power as long as she has bit t*ts'

Despite that they do continue to go up - we are on the 4th montly rise with predictions from the Mortgage Lenders Council of 3-4% house price inflation over next three years.

I agree with you that property SIPPs were not a good idea.

And here is the sadness in this move:

There were undoubtedly large numbers of people who had been enticed by newspaper reports into considering putting a second home or a BTL property into a SIPP which was a wholly inappropriate idea. (Frankly, I bet that if you asked these people if they thought that they could withdraw the proceeds of the house sale later, the majority would say yes.)

There are however a small number of people for which it was to be a good opportunity to diversify an established pension fund.

Tis a pity that these people should suffer because of inappropriate marketing of the scheme.

tim

The Council of Mortgage Lenders would say that wouldn't they ? ;-)

Do you believe them ? lol

One commentator on TV yesterday said they would have been the 'biggest tax loophole of the century' or words to that effect.

SIPPS was a lousy scheme giving huge tax breaks of 40% for the wealthy to buy property while many young first time buyers are priced out of the market.

Ultimately though these investors were led up the garden path and conned by Gordon Brown, SIPP providers, media froth, and, in some cases, estate agents.

Their money is now stuck in the SIPP (apart from 25% they can withdraw at age 50) and they will have to look at other investments like shares. The absence of regulation means that compensation claims for misselling may be unlikely to succeed except, perhaps, where someone has been persuaded to transfer investments from another pension to a SIPP.

The old adage CAVEAT EMPTOR should always be borne in mind when making investments. There was plenty of information available on SIPP rules. Ignorance is no excuse.

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"tim (moved to sweden)" wrote

I agree with you insofar as self-employed and business people do not have final salary or even contributory Company Pension schemes as an option, thus investment in property may be one of the few ways to provide themselves with a secure 'pension'.

Here's a sob story from todays Times.

This guy expected tax relief of upto £102,000 on a £200,000 property purchase !!!!

All together now .........aaawwww

The Times December 07, 2005

Stuck with a £200,000 flat and no tax relief Christine Seib

JULIAN WARD is one of thousands of investors who planned to pour as much as £8.5billion into the British housing market on the back of a generous tax break on residential property.

Instead, after the Chancellor's dramatic turnaround yesterday on what investments would receive tax concessions in self-invested personal pensions (Sipps), Mr Ward is stuck with a £200,000 second property and has missed out on tax relief of up to £102,000.

The 40-year-old mortgage broker recently completed the purchase of a two-bedroom flat in Colchester with the intention of putting it into a Sipp.

He hoped eventually to add to his property portfolio, which includes a family house in Kent, with a holiday home that he also planned to put in the Sipp.

Yesterday Mr Ward described the Treasury's U-turn on Sipps as "very disappointing" and said that it had soured his views on pensions even further.

"I still think putting your money into property is the most sensible thing to do but now I'll be 40 per cent worse off," he said. "The idea of having a property but getting pension tax benefits was fantastic.

"Now I'm just not going to open a pension, although I will keep the personal pension I have from a previous job."

Mr Ward said that he was persuaded to buy a property to put in a Sipp by "hype" from the media and financial services industry. "I was influenced by the positive spin that was put on it by everyone," he said. "You can't just blame the Government, The Treasury has back-tracked on its own rules that, from April 6 next year, would have allowed savers to buy residential properties and other exotic investments with their Sipp, to take advantage of tax breaks of up to

40 per cent on the purchases.

Because Mr Ward bought his property before the Sipp rules came into effect, he planned to transfer the property into the Sipp after next April.

To avoid breaching the £215,000 annual limit on personal contributions to Sipps, Mr Ward would have transferred his house in two chunks over the next two years.

Tom McPhail, head of pensions research at Hargreaves Lansdown, the financial adviser, said that Mr Ward could have gained tax relief worth up to £102,000 on his purchase because the Government would have grossed-up the initial £200,000 at the basic tax rate, equal to £56,000. He would then have received additional higher-rate relief on the £256,000, worth about £46,000.

Mr McPhail said, however, that at the time Mr Ward made his property purchase, the Government had not set out detailed rules on how it would treat properties used in lieu of cash contributions to pension funds, so the total amount of tax relief might have been less than expected..................

PLAYING THE NUMBERS

Value of annual sales insurers had expected from Sipps: £200 million Amount that had been expected to pour into UK housing market from Sipp investors: £8.5 billion Amount Sipp investors had been expected to spend on overseas property: £1.5 billion Initial investment savers had expected to need to purchase a £150,000 property: £60,000 Top tax relief that would have been available on Sipp investments: 40 per cent Value of the fund that can be borrowed to pay for investments: 50 per cent Annual limit on contributions to a Sipp in 2005: £215,000 Annual limit on contributions to a Sipp in 2010: £255,000 Percentage of pension pot that advisers recommend should be invested in property: 20 per cent