‘A-Day’ on 6 April 2006, will see major changes to the rules regarding self-invested personal pensions (SIPPs). First introduced in 1989, SIPPs at the present time can contain several types of investment, including commercial property. However after A-Day, it will also be possible to invest pension funds in residential and non-commercial property overseas and receive certain tax reliefs.

This can include your own home, buy-to-let and non-commercial property overseas, and looks set to benefit not only those seeking to enhance their pension funds, but also general property investors.

Nick Clark, managing director of the Homebuyer Show said, "The high number of buyers coming to the market in the form of pension funds could boost house prices by up to 15% through increased competition for properties. This will benefit existing homeowners and property investors who could see their buy-to-let returns substantially increase as the market booms."

However the new rules will also mean dramatic changes in the lending ratios of SIPP funds. Stuart Law of property investment specialists Assetz plc explains: "Currently, pensions can fund up to 75% of a commercial property investment, however changes on A-Day will limit this to as little as half of a fund’s value. This means that someone with a £100,000 pension fund can currently invest this in commercial property of up to £400,000, but after next April will only be able to stretch this to £150,000. Investors who are keen to take advantage of opportunities in commercial property should therefore do so prior to the changes in April next year in order to make the most of their funds."

Specialist advice

Stephen Harper, managing director of the Millfield Fountain commented, "The new rules are great news and will create a surge of interest, but it is vitally important that people deal with a specialist. There’s going to be a lot of bureaucracy and complexity and so an IFA who is up to speed with the areas of both pensions and property is essential."

Nick Clark, said, "Although the new rules for SIPPs will present masses of new opportunities for pension investment it is essential that investors fully research the options and restrictions applicable to them in order to really take advantage of the changes and maximise their benefits."