The shake-up of pension rules is expected to lead a surge in demand for pensions that allow hotels, museums and even strip clubs as legitimate investments.
Self-invested personal pensions (Sipps) were introduced in 1989 to give investors freedom to manage their investments within a tax-efficient pension wrapper.
Sipps can be used for income drawdown, but this option, known as an alternatively secured pension (ASP), has been largely given a wide berth by retirees over 75 due to the hefty tax charges imposed on funds on death after this age.
But from next April, pensions in drawdown will be taxed on death at just 55 per cent, down from
82 per cent currently in ASP. This, along with the introduction of a new uncapped flexible drawdown option, is expected to increase their appeal.
“This is great news for the Sipp market,” says John Lawson, head of pensions policy with Standard Life, the provider. He said people had shunned ASP because of the restrictions on how much income could be withdrawn as well as the hefty taxes.
“Removing these restrictions and substantially reducing the tax charge will result in a big increase in the numbers of people opting for drawdown via Sipps.”
The Revenue has set tight rules about what kind of investments can be held in a Sipp. Residential property, including buy-to-let, is excluded, as well as “moveable goods” such as antiques, classic cars or art.
Stocks and shares are permitted investments, along with commercial property – but providers say the rules allow investors to include unusual investments.
“We have heard of a strip bar in the UK being held in a Sipp,” says Stewart Dick of Hornbuckle Mitchell, the Sipp and income drawdown provider. “It is a colourful investment, but it falls into the same category as a pub or a bar.”
Other unusual investments that have been put into a Sipp include vineyards, cricket grounds, museums and vineyards.
There is also a push to allow investors to capitalise on interest in renewable energy.
“We have seen an increase in the number of requests about whether wind turbines or solar panels can be held in Sipps,” says Dick. “Wind turbines and solar panels are not allowed under the tangible, moveable property (TMP) rules but we are lobbying for a common sense exemption to the current legislation.”