Pension Scheme Investments : Can you use your house as a pension?

The Finance Bill has introduced final regulations covering pension scheme investments in residential property and chattels.  These were to be permitted as direct investments until the Chancellor ruined everyone’s  day in the Pre Budget Report.  The Bill sets a range of tax charges that effectively ban these investments.

Permitted investments :

Commercial property-As per pre A day regulations.
Hotels.  Including ownership of part or all the hotel, provided not occupied by a member or connected person, or they have a right to occupy.
Student accommodation (e.g.  hall of residence, but not flats/houses.)
Care homes or prisons.
Purchase of land and development or residential property, or conversion of a building to residential, providing the pension scheme disposes of the property before the development or conversion is complete.
The residential element of a commercial property, provided itr is not occupied by a pension scheme or a connected person.  E.g. A shop with flat above, where the shop and flat are let to the shopkeeper.
Residential elements of a commercial property occupied by an employee as a condition of employment (provided the employee is not a member of the pension scheme or a connected person).
Investment grade gold bullion.
Residential property or chattels, unit trusts, investment trusts or OEICs subject to indirect investment rules.
Real Estate Investment Trusts (due for introduction in 2007).
Other vehicles investing in residential property or chattels- known as Genuinely Diverse Commercial Vehicles.
Any investments held in taxable property before 6 April 2006 which were allowable at that time can continue to be held provided there is no expenditure by the pension scheme on improvements.
The 50% borrowing rule for post A day investment has not changed.
 

Other investments are likely to incur tax charges .  these charges are very high and make pension scheme investment in taxable property unfeasible.
 

To sum up, there remain some good opportunities for pension investments such as shops with flats above and residential property development as well as pooled vehicles and syndicates;  although nowhere near what was originally mooted by the government
 

For information on residential and commercial mortgages go to www.you-can-mortgage.co.uk or telephone 01022 606363


This article is based on the authors interpretation and understanding of the regulations published on 24 March 2006 which are subject to change

Author: Jerome Thompson Cert PFS

The Finance Bill has introduced final regulations covering pension scheme investments in residential property and chattels. These were to be permitted as direct investments until the Chancellor ruined everyone’s day in the Pre Budget Report.

Published on 10/5/2006.

All articles.