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All About
SIPPs (self-invested personal
pension)
Latest news about SIPPs>>>
Dear Fellow
Investor,
Under
the pending rules, British pensioners will, for the first time, be
allowed to use money in a
self-invested personal pension fund (SIPP)
to buy residential property, including second homes and investment
property in other countries. While there are many ramifications, the
most striking feature of the changes is a tax break that could amount
to 40 percent of the purchase price of a home, depending on the
buyer's tax bracket.
In effect, a buyer using money in a SIPP fund could
buy a £75,000,
property with only
£30,000.
Also, properties generating revenue will be exempt from most U.K.
taxes. SIPP holders will be able to increase their purchasing power,
as the UK government will contribute up to 40% of what SIPP holders
invest. Coupled with the opportunity to borrow 50% of the value of the
SIPP, this means
that £75,000 of purchasing power
can be achieved by a client making a net (after tax-relief)
contribution of £30,000.
The new rules are set to go into effect April 6, commonly referred to
as "A-day" in the pension industry. "As soon as people begin to
realize, it will be like pouring fuel on a fire," said Jeremy Rollason,
a director at Savills International, the U.K.-based real estate firm.
"People will be rushing to purchase residential property through these
schemes. Potentially the impact could be quite large".
Some
countries, including Spain and France, do not recognize trusts, which
is effectively what a SIPP is. Cyprus, however, has legislation in
place that mirrors that of the UK, thus allowing individuals the
opportunity to purchase property via a SIPP. The recent negative
comments regarding SIPPs in the National Press have concentrated on
these countries rather than Cyprus and its unique position.
With the help of the new pension rules, a British buyer in Cyprus
could reap the U.K. tax benefits at the purchase and then sell the
property without paying tax on the profit, thanks to Cyprus' lenient
tax laws. "Effectively, it's a double whammy," Jeremy said.
The British continue to be voracious buyers of overseas real estate,
encouraged in recent years by inexpensive air fares. More than 250,000
(55,000 in Cyprus alone) British citizens now own property overseas,
up 50 percent in the last decade, according to the government's Office
of National Statistics.
While estimates vary wildly, analysts believe the changes in the SIPP
rules will shift anywhere from £5 billion, or $9 billion, to £11
billion of pension funds into real estate in the next few years. And
the number of SIPPs is expected to grow tenfold by the end of 2006.
While SIPP purchases will be exempt from most U.K. taxes, overseas
buyers will be subject to the tax laws of the local country, adding a
level of complexity to any transaction. Spain and France for example,
do not recognize trusts.
Around Europe, property Investors are preparing for a potential wave
of new buyers. "We've already had a tremendous amount of inquiries,"
said Mr. Louis Costantinou, managing director of Cyprus 4 Properties,
based in Cyprus. "We're all trying to gear up and jockey for this
enormous rush come April."
In order to
assist you in your research for property investment in Cyprus we
have selected some information regarding SIPPs (self-invested personal
pension) that will help you better understand what SIPPs are all
about:
By Mary Antonescu -
mary@cyprus4properties.com
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