Pensions and Property

I said last week there was one solution I had in mind that could simultaneously help solve both the housing market problems and plug the gap of failing state pensions in years to come.

The idea would be to give tax benefits for people investing in property for pension provisions. At present if you buy a second property and profit in any way, be it income or equity when you resell, you have to pay tax on this money. Fairly obviously this dis-incentivises people from investing in property for the long term.

The tax benefit to the government currently is minimal as a result, so by giving this up they haven’t a huge amount to lose. In fact it’s better than that because the increased volumes of property sales that it would stimulate would bring in much more Stamp Duty tahn they miss in taxing investment gains.

The idea could work both for the individual investor and on a larger scale for pension funds. The latter have many, many millions to invest. They too receive no tax incentive to invest in residential property whereas there are other investments from which they do. On the latter front I would suggest that such investment, if allowed, would have to be stipulated to be spread around the country, not just in London where if left to their own devises I bet it would end up. London city markets have had more than enough encouragement over the years – this needs to work for the country as a whole to be fair and benefit all. Perhaps assigning a certain amount per fund, per county would work.

I’ve tried, but I can’t really see a down side to the idea. Such common sense no doubt means it has next to no chance of being taken up by any one in a position to do something, but I have written to our local MP to give my two penny worth. We can but try...