Investing in residential property through a SIPP will be too costly for most consumers, says Landlord Mortgages.
Lee Grandin, managing director of Landlord Mortgages, says that SIPPs wont have a monumental effect on the residential property market that some people are predicting.
He says: “You would need a pension fund of at least 80,000 and to borrow an additional 40,000 to purchase the average UK buy-to-let property. From anecdotal evidence, I really dont think that most UK consumers have this sort of money either in their pension pot or their back pocket!
Grandin says that even if people could access that sort of capital, they can only contribute 100% of their salary or up to 215,000 (whichever is the lesser amount) into their SIPP each year. That means that, unless they already have sufficient funds in an existing pension, they will need to save for several years before even thinking about investing in residential property.
Grandin adds: “From the perspective of an existing landlord or even a holiday home owner, SIPPS are also not that exciting. In order to include a property you already own into a SIPP, you would need to sell it to the schemes trustees and potentially incur a huge capital gains tax bills.
“Anything, that encourages people to save for their retirement should be applauded but I really dont think that the new regulations for SIPPs will have a revolutionary effect on the residential property market or solve the pensions crisis.”