Newsletter - March 2007

So Property is your Pension?

In this issue:

• Mistrust of pensions
• An exciting property investment opportunity on the Algarve’s Silver Coast
• Overseas Healthcare
• Property Investment Services

Mistrust of Pensions

So often we hear that people have decided to turn their backs on pensions and look at property as a means to provide for their financial future. Such mistrust in pensions follows a fall in equity values and concerns over mis-selling issues. Brian Aldridge, TV eco-homes designer, says in the Sunday Times Money pages February 25th 2007 in response to a question about him having a pension or retirement plan: “I don’t and I am very conscious of the fact, because we should all plan ahead. But I have heard so many horror stories about pension schemes and it has put me off in investing in one. I think property investment is a much better proposition.”

Pension Benefits

But is it right to ignore pensions and the tax advantages that exist in respect of contributions and the status of the fund? After all, if an investment offered you an immediate 40% discount (for a higher rate tax payer), courtesy of the Chancellor of the Exchequer, then that would be seen as a good deal. Coupled with the fact that the growth of the fund would be tax-free then that is a huge incentive to ignore.

Property as an investment

True, property has shown some good long-term increases in capital value and, of course, always has a residual value. Also investors feel they have more control over a tangible asset and the opportunity to diversify risk by investing in different properties in different locations. Emerging markets overseas have shown some spectacular growth.

The desire to invest in property for the future really needs to be planned with a coherent strategy in mind. Trying to downsize at some stage in the future is not as easy as it seems and one can’t realise the asset for pension purposes if you are living in it! Also what are the tax implications for property bought outside of an individual’s main home – the Revenue will want its share of the capital gain!! Will it be possible to sell the property – a key factor in any strategy?

An ideal scenario – the best of both worlds

Surely though if one could invest in property, and do so getting the tax advantages of a pension wrapper, then that is worth considering. Is that not what all the excitement was about when it was proposed that an individual could put residential property into a SIPP, before the Chancellor changed his mind?

The good news is that one can! There are schemes that allow individuals, or companies and pension funds, to invest in property, both commercial and residential, and benefit from the perceived benefits of property investment along with qualification for the tax breaks enjoyed by pension funds. Effectively the investment is into a fund that is structured in a particular way to maximise the tax opportunities and realise the gains in property values. This may be a great opportunity for an individual investor to consolidate any closed pension savings or preserved pension which are not performing well and investing in a potentially more exciting property fund.

The following 2 property portfolios provide differing opportunities, one long-term the other short-term.

• An opportunity to invest in Cape Verde. This enables investment into a hotel construction project in the Cape Verde Islands, which are fast developing to become a significant holiday destination. Cape Verde is regarded as the next “Caribbean” and only just over 4 hours flight time from the U.K.
  
  In essence the portfolio aims to return the capital investment in just over 3 years (within one year of operation once the complex is built) and then provides an income on the retained share-holding by way of dividend from the net operating profit of the hotel. Some may know that Thompson are well ahead of the game in bringing direct flights to the Cape Verde Islands and currently their existing RIU hotel on the Island of Sal is enjoying extremely high levels of occupancy. Hence the opportunity for a new hotel is self-evident and will be managed by a major tour operator on a lease back arrangement for 25 years.
  The minimum investment is £16,000 – approximately 25,000 Euros.
  
  For a sophisticated investor, who is not looking for an immediate return, but long-term income with the return of capital within a reasonable timescale, then this could be very interesting. Early retirees, who need to think about increasing income in the future, are also potential investors.
  
  Monies can come from SIPPs and SSASs, individual monies and company funds. There is scope for investment of preserved pension benefits where consolidation of funds may be in the interest of the client who is seeking a more exciting and potentially better return.
• The second scheme utilises the structure of a protected cell company. This scheme enables the investment into off-plan properties via a fund. The investment is secured by way of preference shares in a Guernsey based company listed on the Guernsey stock exchange and is fully authorised by the Financial Services Authority (FSA).
  
  The fund then buys the “right to purchase contracts” for the off-plan properties and seeks to sell these on by the time of completion of the properties, benefiting from the capital gain achieved at the completion stage. The sale of these properties is supported by a significant marketing structure so the best possible returns can be achieved within the build phase.
  
  The potential profit is the increase in the overall sale price for the property, but investment has only been the 30% deposit to secure the right to buy contract and hence the gearing effect can be very attractive.
  
  Currently the properties purchased by this fund are in Southern Spain, but there are plans for other markets to be considered for future cells, including Cape Verde and Portugal.
  
  A key and differentiating feature of this fund is that it seeks to provide attractive returns from property investment over comparatively short periods of time.
  
  The minimum investment is 25,000 Euros – approximately £16,000. There is no individual ownership of property by the investor and the fund is responsible for the ensuring all marketing activity is in place during the build phase. Each property that is purchased by the fund offers a minimum return of 15% over the 2 years investment period supported by a bank guarantee.
  
  Investment into this fund is available to investors through pensions, ISA and PEP transfers, as well as direct, corporate and personal investment.

If you are a professional adviser, pension fund trustee or SIPP provider wishing to know more about the above funds and how you can work with SIPS please contact Glenn Hanson, Managing Director, ghanson@sips-ltd.co.uk.

If you are a private investor please contact us using the enquiry form on our website and we will contact you directly or, if need be, through an authorised adviser.

 

The above information is intended to give an overview of available funds and does not purport to provide any individual with investment advice. Investment into such funds will generally only be accepted where the individual can confirm a regulated adviser has given independent financial advice or where the individual can demonstrate they are sufficiently financially aware so as to make an independent investment decision on an execution only basis.
SIPS Ltd is able to introduce potential investors to an authorised adviser for this purpose where required.

 

An exciting property investment opportunity on the Algarve’s Silver Coast

Introducing Mar da Luz, an exciting development of apartments and villas, enjoying a fabulous tranquil location on Portugal’s Silver Coast, which we believe offers “the best of both worlds”.

To be set in and around some of the Algarve’s best golf destinations, this development consists of 43 high specification apartments.

There are 5 star facilities and a Guaranteed 2 Year Rental Package.

In our experience, there are two areas of focus for those people looking to invest in property abroad. The “lifestyle” purchase, for those who want to benefit from investment, themselves, for holidays or a place to retire to, to get away from it all. Alternatively the “Investment” purchase for those looking to maximise returns from rental returns and increases in real estate prices.
This does not necessarily mean that these elements cannot go hand-in-hand and at Mar da Luz, in our opinion, the balance has been struck.

The Algarve continues to command high rankings in the “places to buy abroad” league tables. A good climate, cheap short flights, beautiful beaches, excellent golf (Established Golf destination of the year, 2006), controlled development, much-improved infrastructure and tourist facilities, the list goes on.

Property prices in the more central areas of the Algarve have seen substantial growth over the last 5 years, coupled with high, and increasing, tourist occupancy.

The “Silver Coast” or Western Algarve offers, in our opinion, even more. Recent improvements to the IP1 Motorway means that access times to this region, from Faro Airport, have been dramatically reduced. This, combined with a tightening of planning regulations for new builds, particularly near the ocean, adds up to an area that is enjoying a buoyant time for property prices and tourist occupancy.

In other words, an area that is particularly exciting for property investors, looking for opportunities, within one of the more established markets overseas that still has the potential to provide an attractive return on investment.

With approaching half of the development sold, we are confident that Mar da Luz appeals to both lifestyle purchaser, looking for a high specification property in a stunning location and overseas investors looking for capital appreciation and rental returns. Some will purchase outright and others look towards gearing their investment from UK or Euro based mortgage sources.

Potential returns can be discussed based on assumed growth rates, to establish envisaged return on investment.

Regular inspection trips to see Mar da Luz and comparable developments on the Algarve are taking place over the coming weeks. Please do not hesitate to contact SIPS for details.

We have other opportunities available to those looking to invest overseas, and are always happy to discuss individual requirements.

 

Overseas Healthcare

Many people will have seen the recent Channel 3 programme, hosted by Trevor McDonald, which showed the real difficulty people can encounter with healthcare provision when living abroad.

Often people move abroad and never give a thought as to what they would do if their health failed and they needed medical treatment. Failure to address this may mean there is no healthcare provision either abroad or back in the U.K. because of residency issues.

Take for example Spain. You are covered as a visitor for emergency treatment only for up to 2 years. Thereafter you are on your own. If you decide to be a resident in Spain, then healthcare is only afforded to you if under retirement age if you are paying social security contributions there. Note you cannot claim care back in the U.K once you are resident in Spain and there is likely to be a waiting period if you decided to return to the U.K before claiming treatment from the NHS.

SIPS has teamed up with alc healthcare, through an affinity arrangement, to provide healthcare solutions and travel insurances that are structured to meet the following requirements:

• Multi-trip travel insurance – Worldwide and Europe. Ideally structured for those having two homes in the EU.
• Healthcare worldwide
• Healthcare (Prima Iberica) specifically tailored for those resident in Spain, Portugal and Gibraltar.

If you are in anyway involved with assisting individuals moving or travelling abroad, either to live, work or just holidaying then speak to Glenn Hanson, Managing Director at SIPS as you could benefit from providing alc healthcare and travel products to your clients.

Click on the following link to obtain on-line quotes and information.

 

SIPS - Our property investment services

SIPS is dedicated to supporting those who wish to invest in property and to do so effectively.

We work with a range of business partners who specialise in their respective areas so we can bring the very best of solutions to our clients, be they professional advisers requiring services for clients or private investors seeking to invest in property both in the U.K and/or overseas.

 

Our range of services include:

• Overseas Property Investment - "a home in the sun" or via overseas property funds.
• Healthcare and travel insurance solutions.
• Innovative tax solutions for those who have large investment property portfolios and need to protect such assets.
• U.K property investment including management and lettings.
• Property insurances.

Contact us

If you would like any further information on any of the subjects raised in this newsletter please contact SIPS using the enquiry form on our website, www.sips-ltd.co.uk, or email info@sips-ltd.co.uk. 
If you are a professional adviser wishing to utilise the services of SIPS or would like to discuss partnering arrangements in respect of any of our services please contact Glenn Hanson, Managing Director – ghanson@sips-ltd.co.uk. 

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