12 October 2005

Cyprus property gains from UK pension change

An expected rise in second-home property market following changes to the UK pensions system has prompted the establishment of a new company in Cyprus.

The O'Garra Group will be one of the first on the island to provide professional advice and investment management services to UK taxpayers who will, for the first time, be able to purchase residential property within a private pension fund.

Proposed changes to self-invested personal pensions (SIPPs) in effect from 2006 will mean that UK taxpayers will be able to control their own pension investments and will be able to use it to purchase residential property. The changes come into effect on April 6, 2006 but the new rules can be taken advantage of immediately.

The O’Garra Group is a family-owned professional services company with the principal offices located in Limassol, Cyprus.

The company aims to guide individuals easily and securely through the processes involved in realizing their dream of owning a second home in the sun, and is already involved with numerous clients wishing to purchase holiday homes in Cyprus as a result of the relaxation of the rules regarding self-invested personal pensions (SIPPs).

The changes to UK pensions law are expected to fuel a new property boom in Cyprus with private pension holders keen to take advantage of generous tax breaks from both the UK and Cypriot governments.

SIPP holders will be able to increase their purchasing power, as the UK government will contribute up to 40p of every pound SIPP holders invest. Coupled with the opportunity to borrow 50% of the value of the SIPP, this means that GBP 150,000 of purchasing power can be achieved by a client making a net (after tax-relief) contribution of GBP 60,000.

For various reasons Cyprus is expected to be a major beneficiary of the increased monies available due to purchasers. Some countries, including Spain and France, do not recognize trusts, which is effectively what a SIPP is. Cyprus, however, has legislation in place that mirrors that of the UK, thus allowing individuals the opportunity to purchase property via a SIPP.

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