Bulgarian Property Investments - A Suitable Pension Investment?
Author: K Damian Qualter BA MBA
Bulgarian Property Investments - A Pension Option?
The pension investors can expect a renewed rush into buy-to-let property next year when the new pension rules come into effect. As of April 2006 they will allow pension investors to gain a 40% tax relief when they invest in property through self-invested personal pensions. What this means is that properties that are worth 200,000 can actually be bought for 120,000 by higher-rate taxpayers who are using funds in their pensions.
Many of the investors are known to be re-mortgaging their main homes so that they can release the cash value and use it to purchase even more property. However, there are some others out there who will question why buy-to-let investors should get this new tax relief at all, when first-time buyers can't even afford to get on the first rung of the property ladder.
Right now property companies are affiliating themselves up with financial advisers to sell off-plan apartments to investors when the new rules are in place. However not everyone is on board with this new plan. The tax breaks that are gained from investing through a Sipp are supposed to provide a huge boost for residential property investors, but buying new-build might not really be a good way of securing your future retirement money. There are an estimated 120,000 Sipp plans, most of them are held by Britain's richer investors.
Most of the pension experts right now believe they are only good for higher rate taxpayers who enjoy a 40% tax break on their pension contributions. Every slogans such as retire rich with a property pension has been appearing on financial websites, on company literature and, more and more often, in radio advertisements all over the place and even online. Claims are focused around rule changes which mean that the savers can use their pension to:
Buy property at a 40% discount. Never gains pay capital gains tax or income tax on their property profits. Cut the income tax on their entire salary or business profits to nothing.
This naturally applies if they use the rules to the extreme. Many of those campaigners who against poverty have watched as the government first proposed pension rule changes that allow the rich new ways to avoid paying tax by investing in a wide range of assets. These Off-plan developments can eventually lose their premium within months of completion, almost like a new car as it leaves the forecourt. So there is a very large risk involved here.
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