HM Revenue & Customs has announced that real estate investment trusts and other vehicles holding residential property will be allowed within pension funds. The Revenue recently confirmed that Unit Trusts, Open Ended Investment Companies (OEIC's), Real Estate Investment Trusts (REIT's) and Insurance Funds holding residential property will be permitted within pensions, provided the 'vehicles meet certain criteria that is consistent with conditions imposed on REIT's'.
For example, no self-invested personal pension member may hold more than a 10% share in the vehicle, and they must have at least 3 residential properties or hold assets valued in excess of £1 million.
The Revenue has also said that the pension investor must not be able to use or occupy the property.
Our view
This is not the same as being able to hold residential property directly. We prefer commercial property within pension funds for rental yield rather than residential although their may be some opportunity for speculative residential property development growth in the right geographical areas.
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