THOUSANDS of investors were stunned last week when Gordon Brown announced a dramatic u-turn by revoking planned changes to the rules governing self-invested personal pension schemes (Sipps).

However, pension specialists said the original changes should never have been proposed in the first place as they were unsuitable for most investors and could have left them worse off.

From April 6 next year, dubbed A-Day, new pension rules take effect which have been designed to simplify the pensions regime and make it more flexible and transparent.

One of the main changes proposed by the government was that people would be able to hold anything within their Sipp, including residential property as well as more esoteric investments such as wine and art.

Research from Killik & Co, a stockbroker, found that such investments would only be suitable for those with around £500,000 or more invested in their pension. If you had less than that and bought a residential property, for example, you would find you had too much exposure to that asset class.

However, these people will now no longer be able to do this anyway following the chancellor’s about-turn in last week’s pre-budget report. He announced that from A-Day any tax advantages of having such assets within a pension will be removed.

What has angered investment advisers most is the timing of the announcement. Melanie Bien at Savills Private Finance, a mortgage broker, said: “It is outrageous that the government has taken so long to pull the plug on direct investment in residential property via a Sipp. A lot of investors will have been ploughing money into their Sipp, or buying property in anticipation, only to find that this has been a waste of time.”

Now, anyone who does hold a prohibited asset within their pension will face an income-tax charge of 40% and the scheme administrator will become liable for a “scheme sanction charge”, which will be 15% of the value of the prohibited asset.

The reason for this change of heart is that the government was worried that the system would be abused by people claiming tax relief for the money in their Sipp to buy a second home for their own personal use.

However, this blanket decision has infuriated many who have said that there was no need for such a dramatic u-turn.

Mike Boles, 37, pictured with his wife, Gwen, and daughter, Loren , had intended to buy a ski chalet in France next year and hold it in his Sipp.

Boles, a financial adviser from London, said: “I can’t believe the chancellor has strung us along for this long, only to change his mind at such a late stage. I’m not surprised the government has clamped down on own-use, but to rule out buy-to-let as well is ridiculous.

“I will still buy a ski chalet as I think it will be a good investment for my retirement, but because I won’t get the tax relief from being able to hold it in my Sipp it will take me longer to save enough money for it.”

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