Property for pensions will benefit savers: Datamonitor

Research group, Datamonitor, claims that the wealth of the richest members of society will increase by £2b, if government plans to simplify pension rules are implemented.

The rules, which are expected to be introduced in April 2006, will allow people to include buy-to-let investment property in their pension fund, meaning that many investors will be able to claim pension tax relief.

According to Datamonitor, the new rules will mean that the top-bracket 40% income tax payers would benefit from tax relief totalling £2bn a year.

Although the planned pension reforms will affect the whole market, Datamonitor believes that the option to claim tax relief on a buy-to-let property would prove particularly attractive to the rich. It estimates that the majority of people taking advantage of the pension reforms will be earning more than £75,000 a year, because of the high costs involved in setting up the self-invested personal pension necessary to be able to claim tax relief on buy-to-let property.

Oliver Guirdham, author of the Datamonitor report, said “The government has underestimated the impact that the changes will make”.

Julian Crooks, an independent financial adviser with the Sheffield-based Financial Planning Service, said that the buy-to-let tax relief was a “retrograde step.” He said “The money would be better spent encouraging people on average incomes to save more for their retirement”.

Link: Property for pensions will benefit savers: Datamonitor