George Osborne has announced plans that will see unused commercial property be turned into residential housing within a self-invested personal pension (SIPPs).
In Budget documents the Treasury revealed: "The government will explore with interested parties whether the conversion of unused space in commercial properties in high streets and town centres to residential use could be encouraged by amending Investment Regulated Pensions Schemes rules. Any amendments would need to be consistent with sound public finances and the government’s wider pensions strategy."
The government is essentially using pension fund money to be able to inject a boost in the housing market. Andrew Roberts, who is a partner at SIPP provider Barnett Waddingham, has praised these decisions by suggesting that they will “reduce unnecessary red tape” around schemes in local areas because SIPPs must sell on projects before anyone moves in them under current regulations. This means that both the pensions and property sectors will benefit.
Other experts are a bit more wary of the proposed plans. After the government announced that residential property would be considered under the simplification of pensions in 2006, and then revoked their decision, many believe that the coalition should follow its plans with caution. Many have argued that the free-for-all SIPP investment could have had a lot of potential for market growth as housing associations will have billions of pounds to access if unused pension funds were adopted. However, the general consensus is that it must be “done in the right way”.
John Fox, managing director of Liberty Sipp, added: "At this stage of the downturn, it's surprising that an appropriate and considered way to get residential property into pensions hasn't been addressed. However, it does need to be done in the right way in order to protect investors.”
Further details on the proposed scheme are expected to be announced in the next few months.