Sippable hotel rooms offer high income for pension investors

IFAs seeking to enhance the portfolios of their income-poor pension investors, should consider budget hotel rooms as one component capable of boosting retirement savings within a tax efficient SIPP, reports Assetz.

Pension holders are more concerned than ever about the performance of their current provisions, while those with savings, stocks and shares are also experiencing poor results. Budget hotels, however, are booming in the economic downturn, as businesses seek to make cost savings and reduce their hotel spend.

Assetz Development, in a joint-venture with a specialist hotel contractor, is developing a chain of new budget-boutique hotels, starting in Preston city centre and being sold as individual rooms for direct purchase by individual investors or their pensions. No personal usage is permitted. Classed as commercial property and approved as a permitted SIPP (Self Invested Personal Pension) holding, this hotel room investment offers high net yields in the region of 6-8% or more. Within a SIPP, investors can take advantage of tax exempt income and inflation driven capital growth, as well as basic rate tax relief on contributions. Additional tax relief is available for higher rate tax payers.

Stuart Law, Chief Executive of Assetz Development, part of the Assetz group of companies, comments: "We are offering IFAs and their clients access to an asset class which is actually benefiting from the downturn, providing the ideal opportunity for pension investors to boost their retirement income with a low priced, high yielding property asset. This is an ideal fully-managed, hands off property investment for a pension as part of a balanced portfolio and is for people seeking good levels of income rather than a speculation."

The budget branded hotel sector is competing with the privately owned bed and breakfast/hotel sector, which does not deliver a consistant standard of service between different establishments. Budget hotel brands such as Premier Inn (owned by Whitbread) and Travelodge base their core growth strategies on this fact, by offering good value accommodation with a reliable level of service. In September, Travelodge reported a 45% annual increase in bookings from business travellers, as businesses begin to cut costs during the credit crunch.

The 90 Preston hotel rooms offered by Assetz cost from £69,995, with a guaranteed income provided for the first three years. Preston city centre is undergoing a £700 million regeneration programme, with more than 1.5 million square foot of commercial, residential and leisure space being built over the next 5 years, on a 32-acre site. The hotel itself is a budget-boutique hotel costing guests from just £45 per night and offering an attractive and contemporary design-led interior, with all-inclusive services including free WiFi and local calls.

To facilitate diversification of client funds, advisers will also have access to the Assetz Group Property SIPP syndicate which enables smaller pension funds to benefit from the hotel room investment through joint ownership with other SIPP members as an alternative to owning an entire hotel room.