SIPPs experts warn on risks and rewards

Insurance giant Norwich Union raised its concerns with the FSA on the marketing of residential property intended for investment into a SIPP (self-invested personal pensions), when simplified pension allows this benefit to rule.

Norwich is concerned that some of the SIPPs’ marketing is over-emphasizing the benefits but not the possible pitfalls. Adverts say that by buying residential property through a SIPP, customers will “effectively” reduce the cost by 40% due to the tax breaks. However, the adverts fail to warn the possibility of a substantial tax bill for investment in overseas properties or that the investor could lose control over his/ her property.

Iain Oliver, Norwich Union’s head of pensions said that they are concerned that some of the current marketing of new SIPP investments is over-simplistic for what is actually a very complex decision with long-term applications. Oliver believes that both the possible rewards and risks should be portrayed in a balanced way such that people will understand the implications of investing in residential property in a SIPP entails.

On the other hand, SIPPs specialist Keith Boniface reassures that there is no substitute for good professional advice. Boniface says that SIPPs urges any customer considering investing in residential property in a SIPP to seek such advice. He adds that there are many SIPPs-friendly developments in Spain that can be ordered for completion in the next tax year and onwards. This gives extra equity growth for the pension, according to Boniface.

Alberto Linares of SIPPs Spain said that they share some of the concerns, which Norwich Union surfaced. They advise that people who want to invest in property in Spain through SIPP should discuss their pension futures with independent pension specialists. Afterwards, they could consult their property requirements with SIPPS Spain.

Posted on: Spain

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SIPPs experts warn on risks and rewards

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