In his pre-budget statement in the House of Commons yesterday the Chancellor Gordon Brown appears to have slammed the door on putting wine into SIPPs (Self Invested Personal Pensions).
In what has been widely seen as a U-turn, Brown has stunned the UK pensions industry by classifying investments like residential property, holiday homes, wine and fine art as ‘prohibited assets’.
This means that, although wine can still be put into a self-directed pension plan, it will not be eligible for tax relief and may well be subject to other taxes and charges.
In his speech Brown linked tax avoidance and fraud with the misuse of SIPPs schemes to purchase second homes. New legislation, which will cover prohibited assets is expected to be put before Parliament before the end of the year and will have to be enacted by A-Day – 6 April 2006, when the new pensions rules come into force.
Brown’s announcement has angered the pensions industry. Saying they were ‘very disappointed’, Alastair Butt of Brooks Macdonald pointed out the Inland Revenue has been providing them with guidance on how wines and other assets could be included in Sipps, and now the government needed to clarify the situation.
It has also angered some in the fine wine trade. ‘I’m disappointed and shocked’, Simon Staples of Berry Bros & Rudd – which had given substantial publicity to the imminent inclusion of wine in SIPPs – told decanter.com.
Alan Rayne of Magnum Fine Wines plc said ‘It’s a typical knee-jerk reaction from this Chancellor. Having made a mistake he now makes a complete U turn.’
It now seems likely that the only way to invest in wine for a pension will be through a wine fund, by which the investor buys shares or units and not cases of wine. If a wine fund formed part of a pension plan it would probably be eligible for tax relief, although this needs to be confirmed.
The big question is whether Brown’s U-turn will reverse the recent rise in wine prices. ‘I don’t think so,’ Staples said. ‘I can’t find any stock.’
Gary Boom of Bordeaux Index agrees. ‘The rise is due to global demand. For instance there are no parcels of 1982 Bordeaux available.’ However, Rayne said, ‘Yesterday traders were quoting £11,000 for a parcel of wine. Today it’s down at £9,400.’