Pensions update – Pensionable booze to hurt Treasury

Employers that encourage executives to put property and fine wine into their personal pensions are expected to cost the Treasury around £500m in lost revenue.

>From April 2006, high earners will be able to secure tax relief by widening investment opportunities for self-invested personal pensions (Sipp) The new rules, which allow buy-to-let properties, jet-to-let holiday homes, wine and vintage cars to be saved into pension plans, will be used by senior staff to avoid paying certain tax charges.

While such items will be liable for a benefit-in-kind tax if they are used by the individual, it will be difficult for HM Revenue & Customs to monitor this, such as whether foreign homes are inhabited.

Research by market analysts Datamonitor shows that the changes will encourage wealthy workers to invest around £1.3bn in residential property. It also estimates that by 2009 sales of Sipps are expected to overtake those of stakeholder pensions, which were set up for ordinary workers.