Email Mortgages (www.emailmortgages.com), the new mortgage advisory practice providing customers with tailored fee-free advice online via email, has today urged the Government to reconsider its former proposals allowing pension holders to purchase residential property within their Self-Invested Personal Pension (SIPP).
Three years ago the Government undertook a u-turn when it overturned its initial decision to allow residential investment properties within SIPPs. Email Mortgages understands and accepts the reasons why the Government chose to change its policy at that time however, it is now calling for the proposals to be re-evaluated given the extraordinary conditions facing the property market.
If the Government were to introduce such an innovative policy Email believes it would provide a number of benefits such as bringing much needed funding into the UK property market, on top of the fact that it would not be another Bank bail-out which would only serve to increase the debt burden on the UK taxpayer,
Critics of the Government’s initial draft legislation, which would have allowed SIPP holders to purchase residential property within their plans, focused on the potential threat of exacerbating the house price bubble. There was concern that this proposal was purely for the benefit of property investors as it only covered residential investment properties. Those arguing against the initial proposals suggested that allowing investors to purchase these residential properties with significant tax-breaks would have only pushed prices up further, making life even more difficult for first-time buyers.
In recession Britain, Email Mortgages believes these concerns are less pressing and that any new proposals could also allow homeowners to purchase their own property within a SIPP, rather than just providing an opportunity for investors. It also argues that mortgage lenders would find such a policy much more appealing from a credit-risk perspective given they wouldn’t need to lend at high loan-to-value levels.
Email believes any new proposals could also include certain restrictions which would address any significant concerns. Email has suggested the opportunity might only be available for the next 12 to 18 months; SIPP holders have to hold the property within the pension for a minimum of five years; and only a certain percentage of any fund could be used to purchase property.
Michael White, Chief Executive of Email Mortgages, commented: “In a property market which is starved of liquidity, we are asking the Government to take its SIPP proposals off the shelf to see if there is now an opportunity for a variation on the initial policy. We are not suggesting that the initial proposals should be introduced wholesale as previously outlined however the underlying idea of allowing SIPP holders to purchase residential property could provide a much-needed boost to the property market. There will be many individuals out there who have significant pension pots but are unable to access this money to use in the property market. This time we are suggesting the Government may want to consider allowing the purchase of the pension holder’s family home, rather than just investment properties. At present many will be pension rich and cash poor, and this could possibly be an option for those who are facing repossession but have a significant pension pot they cannot currently utilise.
“It is obvious there will still be concerns which have not gone away since the initial proposals were introduced. However, a major one – the threat of boosting already over-inflated house prices – is no longer the issue it was at the height of the boom a few years ago. It may well be that the Government can look at introducing such proposals for a limited period in order to help boost the property market over this difficult time. The Government is at a point where it has given approval for the first stages of quantitative easing to commence therefore we believe that proposals such as this should also be back on the agenda. Commercial property purchase is already allowed within the SIPP wrapper, so is it so far a stretch to allow the same for residential property? When one looks at the money that could be released into the market to boost it and help those people potentially in difficulty, one would hope it is an option worth pursuing.”
