Pension From Property? The SIPP Advantage

If you are like most people, you've taken steps towards creating income in retirement by investing in a pension.

However, if like most people you have invested in a traditional pension, the value of your pension has not been growing as you anticipated and the income you planned to receive from it has been falling through the floor.

The following four major factors have combined to reduce pension income by as much as 30% over the last 10 years - and the situation is getting worse by the month!

1. Increasing lifespan.
2. Falling investment performance.
3. Low interest rates.
4. Withdrawal of final salary schemes by most companies and public organisations.

What can you do about it?

Sadly, most people grow up believing that pensions are something you pay into and forget about until retirement. If that's been your view so far - please WAKE UP. Unless you take direct and positive action, your retirement could be a very disappointing place to be - with far less income than you anticipated or need to live on.

But in all this doom and gloom there is some good news! Some years ago the Government provided for more flexibility in how people prepared for retirement and invented the concept, amongst others, of a Self Invested Personal Pension (SIPP).

Because the Government worried that people might invest in very risky propositions, or in assets which the Government, in their wisdom, thought would not be good investments, they built a set of rules which have evolved over time. However, SIPPs give investors a lot of control over what they invest in AND a greater choice of investment possibilities. Far more than is allowable within a traditional pension.

How does property fit with SIPPS?

As a specialist property investment Agency, Axis believes that investments in property-related assets, which produce solid income and long-term growth, is a far better bet than traditional stocks, shares and gilts.

This is not the article to explain why property assets are a good bet. If you're reading this I will assume that you already know why that's the case! So let's get back to property-related SIPPs.

Within the 'rules' of what SIPPs can invest in, the following property-related investments are allowable. Provided, of course, that the investment is authorised by the Financial Services Agency (FSA). And all of these can be located internationally - anywhere in the world!

• Hotel and resort rooms (no kitchens allowed)
• Land (such as forestry and farmland)
• Property development
• Car parks
• Storage units
• Shops
• Offices
• Warehouses

You will notice by their absence that traditional buy-to-let residential property is not included in this list - for the reason that it is not allowable under current SIPP legislation. Go figure!

An increasing number of investment opportunities have been created to be SIPP compatible, to the point at which our view is that Axis should offer clients a careful selection of property-related SIPP investments.

And so we shall! On Thursday we release our first SIPP investment, which we are genuinely excited about. This is the opportunity to participate, through share ownership, in a property development company which, for nine years, has quietly made good profits in a niche market.

We think you will appreciate the target return of 15% a year over a five year investment period. If achieved this will potentially double your investment in five years. How does that compare to your current pension performance?

How do I invest in a SIPP?

There are three routes to invest in SIPP approved property.

1. Moving existing pension funds to a SIPP

This is the most common approach. It doesn't require additional funds since you will be using your existing pension pot and changing the investment. It is a legal requirement that you are allowed to do this, so don't be put off if your pension provider gives you are hard time!

Of course you will need proper investment advice, which Axis is not licenced to provide. So clients who are interested will be put in touch with an Independent Financial Advisor (IFA) who understands the SIPP investment market and will analyse your personal, individual situation. Note that there are some people - typically in final salary schemes or with guaranteed minimum pension amounts - for whom a SIPP is most probably not a good idea.

2. Move existing SIPP to a property-related SIPP

You may have already gone down the route of placing money in a SIPP, but it is invested in shares or other non-performing assets. Many, but not all, investors will have the right to switch out of their existing SIPP and into another. Each SIPP provider has its own rules and will be fiercely protective of your investment with them (even if it is non-performing!). So be warned, swopping SIPPs may not be easy.

3. Put cash into a new SIPP

If you have cash available for investment in your pension, you can create a new SIPP.

Next steps

Watch out for the release of our first SIPP investment in just a couple of days! Many property investors made a lot of their money through development - buy / refurbish / sell - and this SIPP does just that in a niche market which is still buoyant and still creating good profits after nine years of active trading!

Now it's YOUR turn to profit.

We're doing our due diligence and looking for the very best property-related SIPPs to help you take care of your pension!

Live with Abundance,

Rod Thomas FCA

Posted in Creating Wealth

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