Pre Budget Report Packs a Punch

published 7 December 2005

The highly anticipated self invested personal pension plans (SIPPS) failed to materialise as part of the Chancellor?s Pre Budget Report this week, leading to widespread disappointment from those who had been preparing to invest money in anything from fine wine, to classic cars to help them save for their pensions. The last minute decision to exclude particularly residential property from tax exemption in this way has exasperated estate agents, as well as those who had already put down deposits on off-plan sites. Nick Butterworth from Jackson Stops and Staff was frustrated that Mr Brown appears to have caved in to pressure from those who saw SIPPS as potentially damaging to the property market: ?Few people would have qualified for maximum tax relief when buying a whole property and typical rates of return, though rising, are not yet high enough to compete head on with other investments,? he said. ?This measure would have put little upwards pressure on prices. It would, though, have broadened the opportunity for personal control over one?s pension provision, something that our clients clearly valued and to which they were looking forward.? The clampdown also extends to other investor favourites such as art, antiques, stamps and racehorses, and is bound to put paid to many such people?s plans for the future. There is also concern in the industry that the anticipated pension revival predicted to take place next year as a result of the changes will now be unlikely to materialise. REITS however, look set to go ahead after next year?s Budget, as the Chancellor signalled the long-anticipated Real Estate Investment Trusts are to come into being in 2006, albeit without going into much detail. The move will allow the UK to follow Australia and the US in creating tax breaks for property companies which pay 95% of their profits to shareholders, and is due to make matters easier for companies investing in property. Martin Graham, Director of Market Services at the London Stock Exchange, said: ?The creation of a tax efficient and transparent investment vehicle will expand investor choice by giving a pure exposure to the property market without the complications and restrictions of holding property directly.? Further details will be revealed in the full Budget, scheduled for next May.

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