As of next year, property can be invested in new Self Invested Personal Pensions (SIPPs). KERRY ANN EUSTICE wonders if taking out a SIPP will help quench the thirst the recent pensions drought has left ...

If you have ever wanted your nest to also serve as your nest egg, you may well have an interest in future Government legislation which will allow residential property to be used as a pension plan investment.

As of April 6 next year a date known as A-Day pension schemes will change. Self Invested Personal Pensions (SIPP) will come into force and property, fine wine, classic cars and art all will be items which can be held in a pension.

Generous tax breaks on such items are being used to attract savers to the new policy. An incentive which is needed following a prolonged period of low confidence and interest in saving for retirement.

Tax benefits to be introduced as of A-Day include no tax on capital gains, no tax on rental income allowing all profits reaped from buy-to-lets to go straight into the fund, bypassing the tax man's pocket and also no inheritance tax, allowing investments to be passed on without diminishing the value.

Plus, to attract higher rate tax payers, 40 per cent tax subsidies will be available for top earners.

Neil Higham is a financial advisor for the Sidcup branch of Origen, the fifth largest consultancy of Independent Financial Advisors (IFA) in the UK.

He believes SIPPs will be a popular form of pension plan but thinks they may not be suitable for everyone, especially those who don't like risk.

He said: "An investor in their 50s, could be looking to use a pension in their 60s and may not find it a worthwhile move, due to charges involved.

"It is a policy which will be most useful to those who have a substantial existing pension or those who are in a high tax bracket.

"It's also well-suited for buy-to-lets and second properties, any profits from these go directly into the SIPP."

Neil points out there is not a great deal pension holders can do before SIPPs are introduced. Plus investors should be wary as legislation is likely to evolve by A-Day and many unregulated services are already being offered. Yet there are steps which can be taken to prepare.

"What Origen is seeing is more clients wanting to know where they stand with their pension. A few people, in the run up to A-Day, have had their pension portfolios repositioned, so they will be ready for the change.

"People must remember, especially with property there is an element of risk, as with any investment."

Neil reminds homeowners it will not technically be them who own the property anymore.

"Think of it as you can flush the loo but can't change the wallpaper," says Neil. "Plus there are potential charges to open a SIPP and to keep it going."

Neil agrees the Government's motive for introducing property as an investment opportunity could be because it is a market there is currently a lively interest in and it hopes this enthusiasm could also transfer over into pensions.

He said: "There has been a funding gap within pensions and residential property has certainly acted as a carrot to spark interest in SIPPs.

"But for average earners A-Day isn't all that useful. There has been little thought into how to get these people to plan and to make it more affordable. A much bigger carrot needs to be introduced for them."