Norwich Union is to raise its concerns with the FSA regarding the marketing of residential property destined to be invested into a SIPP (self invested personal pensions). Pension Simplification rules will allow property to be purchased via SIPP from April 2006.
Norwich Union is to raise its concerns with the FSA regarding the marketing of residential property destined to be invested into a SIPP (self invested personal pensions). Pension Simplification rules will allow property to be purchased via SIPP from April 2006.
The company is concerned that some of the marketing of SIPPS is over emphasising the benefits but not the possible pitfalls. For example, adverts say that, by buying residential property through a SIPP customers will “effectively” reduce the cost of the property by 40% because of the tax breaks. However, the adverts fail to warn that there could be a substantial tax bill for investment in overseas properties or that the investor could lose control of their property.
Norwich Union is concerned that some customers, particularly those with final-salary pension schemes, might be tempted to transfer funds out of their schemes and buy a residential property through a SIPP, without understanding the implications of such a move.
Iain Oliver, Norwich Union’s head of pensions, said: “We are concerned that some of the current marketing of new SIPP investments is over-simplistic for what is a very complex decision with long-term implications. We believe that both the possible rewards and risks should be portrayed in a balanced way to ensure that people understand what the implications of investing residential property in a SIPP are.
"There is no substitute for good professional advice and we would urge any customers considering investing residential property in a SIPP to seek such advice."
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Norwich Union
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