Article date: 27 September 2005
Norwich Union is to raise its concerns with theFSA regarding the marketing of residential property destined to beinvested into a SIPP (self invested personal pensions). PensionSimplification rules will allow property to be purchased via SIPPfrom April 2006.
The company is concerned that some of themarketing of SIPPS is over emphasising the benefits but not thepossible pitfalls. For example, adverts say that, by buyingresidential property through a SIPP customers will“effectively” reduce the cost of the property by 40%because of the tax breaks. However, the adverts fail to warn thatthere could be a substantial tax bill for investment in overseasproperties or that the investor could lose control of theirproperty.
Norwich Union is concerned that some customers,particularly those with final-salary pension schemes, might betempted to transfer funds out of their schemes and buy aresidential property through a SIPP, without understanding theimplications of such a move.
Iain Oliver, Norwich Union’s head ofpensions, said: “We are concerned that some of the currentmarketing of new SIPP investments is over-simplistic for what is avery complex decision with long-term implications. We believe thatboth the possible rewards and risks should be portrayed in abalanced way to ensure that people understand what the implicationsof investing residential property in a SIPP are.
"There is no substitute for good professionaladvice and we would urge any customers considering investingresidential property in a SIPP to seek such advice."
Cheryl Cox 01904452617 07800 695 275
James Evans 01904 452791 07800 699 525
Notes to editors
- Norwich Union is one of the UK's biggest insurers. It is aleading provider of life, pensions and investment products and oneof the largest Financial Adviser (FA) providers.
- Norwich Union has strategic alliances with building societiesand other leading UK brand names including CIS and The Royal Bankof Scotland Group. Norwich Union’s news releases and aselection of images are available from Aviva's internet presscentre at www.aviva.com/media.