UK - Pension fund investment in property will not be affected by Chancellor Gordon Brown's decision to close tax loopholes, leading property investment managers claim.
The Budget closed mechanisms that allowed investors to avoid paying stamp duty on property investments.
But Aberdeen Property Investors director Mike Dinsdale said many in the property market had expected this loophole to be closed anyway and that the fundamental reasons for investing in property still remained good for pension funds.
He explained: “Property has now outperformed over one, three and five years and we think it will strongly outperform over the next five years.”
Still there has been disappointment that the Budget did not reduce the level of stamp duty on property investments to 0.5% – the equivalent duty for equity transactions.
F&C director Ian Gleeson said: “The stamp duty level of 4% for a pension fund investing in property is unfair compared to the level that applies to equities. Effectively, the government is trying to discourage pension funds from investing in property and encouraging them to invest in equities.”
By contrast Dinsdale took comfort that stamp duty on property had not been increased.
And Schroders executive director Bill Hughes said this level of stamp duty would make the property unit trust structure more attractive.
He added: “It is also enhancing the role of property as a long-term investment and less of a tactical investment.”
But Hymans Robertson partner in investment practice John Hastings did not hold out the same optimism for property.
He explained said that the asset class did not feature prominently in the Myners report and that trustees were now considering alternative asset classes like hedge funds and private equity instead.
He added: “Some of the feudal aspects of property, such as landlords and tenants suggest that for a lot of UK trustees it is off the radar screen.”
By Paul Sanderson
Johnson Controls International has appointed XPS Pensions as investment and actuarial adviser for two of its schemes, following a competitive tender process.
Merseyside Pension Fund has allocated an initial £400m of assets to a smart sustainability fund managed by State Street Global Advisors (SSGA).
This week's top stories included exclusive coverage of The Pensions Regulator's plans to require schemes to use professional trustees.
Buck has launched a solution to help pension schemes equalise guaranteed minimum pensions (GMPs) in a cost effective way with minimum hassle.