Sippable Turkey Property-Anything to do with a drink?

September 10, 2012
  • Want to know what SIPPable is?
  • Are you fed up with your pension or investment returns?
  • Is Quantitative Easing (QE) affecting your investments? Either through inflation, or suppressing bond returns?
  • Do you want to achieve a balanced investment portfolio and not put too many eggs in one basket?

Ok so I think most of us know that retirees today get less income than in the past. Reduced interest rates have effectively reduced the returns savers can get on deposit savings accounts. In addition, many pension funds rely on government debt, (which is backed by gilts) and the act of pumping more money into the economy lowers gilt yields, reducing pension pot returns and income for pensioners, taken in the form of annuities. It is estimated that retirees with annuities are getting a fifth less than before QE started*

What’s to be done? And what’s the role of Property in Turkey?

There are other ways of saving for retirement which can deliver higher returns. The advent of Self Invested Personal Pension Plans (SIPPs) has opened up a whole raft of different investment choices.

So What is a SIPP?

Turkey Property Sipp-lady with drinkWell it is sometimes the way someone drinks, but the Taxman has a different definition. A  SIPP, or Self-Invested Personal Pension is a type of personal pension scheme. The SIPP itself is a pension ‘wrapper’ that holds investments until retirement when the investor starts to draw a pension income.

SIPPs are designed for people who want to manage their own fund by dealing with, and switching, their investments when they choose.

Do you remember Gordon Brown’s U-turn when, as Chancellor in December 2005, he said he was going to include residential property as a pension category and then changed his mind, much to the consternation of the market? Well the thing that can be invested in and held within a SIPP, is commercial property, including hotel room investments (as long as they meet HMRC criteria)

SIPPable property can be UK, or overseas based. The choice will depend, to a large extent, on an investor’s appetite for returns and risk, existing investments, as well as what’s available on the market.

Benefits of Turkey Property – Hotel accommodation investment:

  • Strong rental returns – around 8% NET (many property investments would deliver this or less and GROSS)
  • Less time-consuming or involving for the investor – the  hotel operator  manages the room  on a day-to-day basis
  • Consistent returns  – tend to be managed by experienced, global, hotel operators
  • Capital growth potential – compares favourably with other investment vehicles like bank savings accounts, (income only and low interest rates), equities (been volatile of late) bonds (values diluted with all the global quantitative easing)
  • Extra comfort – some schemes come with rental guarantees during the hotel start-up period

If this sounds attractive, then here is a potential solution, the first SIPPable resort in Turkey, on the Aegean Coast where you can get 8% NET Yields and take payment in sterling, thus minimising currency fluctuations and exposure.

You can invest in either a whole unit, or if you are more risk-averse, on a Fractional Ownership basis.  Or alternatively simply buy it as a Turkey Property Investment and enjoy the returns with some personal usage**.

NB: * thismoney.co.uk. **Pension rules mean properties included within a Sipp can only be used on the same terms as everybody else, so the owner would have to pay to stay there. Pure residential property is not currently allowable in a SIPP, only commercial property, including hotel rooms, as long as there is no kitchen

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Disclaimer: Property Venture® is not a member of, nor regulated by, the Financial Services Authority.  Past performance is not an indicator of future performance and should not be relied upon when making an investment decision. This blog post has been written in layman’s terms. Investing in property via a pension is an unregulated area. You should take professional advice on pension matters.

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