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MONEY COMMENT
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If the government's pension proposals from earlier this month get approved, we could soon see an increase in the demand for buy-to-let properties. As of 6 April 2005, you may be able to own residential property within your pension scheme. Unfortunately, for current buy-to-let aficionados, it looks like only properties bought on or after this date (known as A-Day) will qualify. No doubt some bright accountant will find a way around this limitation though! At the moment, property investment doesn't enjoy the tax reliefs afforded to the other major assets classes. You get taxed on both the income (although you can reduce this significantly by offsetting costs such as mortgage interest) and any capital gain you make. The proposal to allow residential property to be held within pension funds represents a welcome levelling of the playing field. Although you can hold commercial property within a pension fund, it tends to cost more than your average flat so it isn't a practical option for most people. Some people have raised concerns about these moves. For example, under current pension rules, most of your fund has to be converted into an annuity. So this means you could be forced to sell your buy-to-let investment when prices aren't that favourable. Of course, this is a risk with other investments too, particularly shares. There are also worries that there could be a rush towards buy-to-let pensions at what turns out to be the peak of the market. And if disillusioned punters sell at a loss they won't, of course, benefit from any tax losses to offset against any gains they make. Still, we like broader investment options here at the Fool, so these proposals definitely have the thumbs up, details permitting. Find out more about pensions.