A self-invested personal pension allows you to invest throughout your working life to provide a retirement income. It differs from other personal pensions in that you can choose from a wider range of investments. Big insurers offer Sipps, as well as specialist companies. Sipps tend to be more expensive than other pensions because they are more complicated to set up and run.

Will I be able to buy a house through my Sipp?

Yes, from April 2006. Hefty tax breaks on pensions mean that higher-rate tax-payers will be able to buy a house with an effective 40 per cent tax discount on the asking price. The most you can borrow is 50 per cent of the total value of the fund. You cannot just load your pension with cash before purchase — the most you can invest will be £215,000 a year. Your pension fund will also have to bear all the costs associated with buying a house, including legal fees and stamp duty. If you sell your house to your pension fund, there will be a stamp duty charge and you will stump up for the legal fees twice, as buyer and seller.

What are the drawbacks?

The pension fund will own your home. Your use of the house will be subject to strict restrictions. The scheme’s trustees will be in charge. Your relationship with them will be similar to that of landlord and tenant. You will need permission to build an extension or to paint a wall. Market-rate rents will have to be paid on the property.

Is a house a good pension investment?

Investment experts say that you should hold an absolute maximum of 20 per cent of your pension fund in property. If you put your own house into your pension, you will be forced to sell when you reach retirement, to convert the asset into an income. Even if your pension fund is comprised of buy-to- let properties, you will be holding very illiquid assets which will be difficult to sell in a market downturn. This could leave the date of your retirement dependent on the state of the property market.

Will I be better off putting my house into my pension?

If you buy your own home with your pension you may be better off on a monthly basis, depending on local rents. A £270,000 loan on a £300,000 house would cost £1,125 a month in interest, a repayment mortgage £1,578. If your pension fund owns the house, you will pay market rates to live there: as much as £1,400 a month for a flat in the City of London, as little as £900 for a large semi in Solihull.

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