LAWYERS for some of Britain’s wealthiest residents have uncovered a loophole in the pension rules that allows people to buy holiday properties with their retirement funds.

Scores of investors, including senior directors at some of the City’s top firms, have been quietly taking advantage of the perk to purchase holiday apartments in French ski resorts, coastal towns and even Paris with their self-invested personal pensions (Sipps).

It had been thought Gordon Brown had stamped out the practice in December when he reneged on an earlier promise to allow Sipps to invest in residential property from April 6, including buy-to-let flats and overseas holiday homes.

However, lawyers have found a way to circumvent the rules by purchasing tourist apartments under the French “leaseback” scheme. These are usually classed as commercial properties and so qualify for Sipps.

Sykes Anderson, a firm of solicitors, has purchased scores of French leaseback properties for its well-heeled clients in the past few weeks, and hopes to branch into Spain, and possibly other European countries that also offer leaseback. Another firm is touting property in Cyprus for your Sipp.

However, Sykes Anderson has asked all professionals involved in its scheme to sign confidentiality agreements to prevent precise details leaking out to the wider market.

There are fears the chancellor could clamp down on the practice if ordinary investors start to pile into the plans, as he did with residential property.

It emerged last year that investors were preparing to stockpile up to £10 billion in their Sipps to purchase buy-to-lets and holiday homes from April 6, which would have cost the government £4 billion in tax relief on the contributions. When the scale of interest became clear it was forced to backtrack on the rules.

David Anderson, chairman of Sykes Anderson, said: “Brown’s u-turn may appear to have ruled out using a pension to buy French property, but it is still possible. However, we do not see this as a mass-market product and we would certainly not want the man in the street to think about buying a leaseback property with his Sipp. With a pension of less than £300,000 to £400,000, fees will take a big portion of your fund.”

Mark Nathan, 48, works for a well-known IT firm, and is one of the investors who has used Sykes Anderson to buy a leaseback property with his Sipp. He recently completed the purchase of a self-contained apartment within a chalet in Les Gets, a French ski resort.

Nathan said: “One of the main attractions is that I have control over my pension and the underlying asset. I also think there is potential for good capital growth — demand for apartments in the Alps is strong and it is difficult to get permission for new builds.”

However, he said prospective investors should not be under any illusions. “I have to point out that the process was complex, expensive in terms of the fees and very hard work,” he said. “However, I am confident that the investment will provide a far higher pension income that I would obtain by investing the funds in the usual way.”

Under the French “leaseback” scheme, you buy a self-contained tourist apartment in a development and lease it back to a management company, which then lets it to holidaymakers on your behalf.

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