Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. You are well advised to contact your Independent Financial Advisor for advice specific to your circumstances. Nothing contained in this article should be seen or taken as the writer or publisher providing financial advice.

Could your Spanish holiday villa become an asset of your Pension Fund or could you buy an apartment on the Costa del Sol with a little help from the British Government? Are you ready to join the "jet-to-let investor" set?

From "A Day" -- April the 6th 2006 to be precise -- a revolutionary new pensions regime will become effective in the United Kingdom. One new tax rule will cover both work and private pensions thereby replacing a host of previous regulations. The effect will be to scrap the majority of current pension arrangements.

The Governments aim is, of course, to simplify pensions whilst ensuring that all the necessary controls over the handling and use of this tax free capital are in place. It is really important to note that the detailed rules governing the precise changes will be published -- it is expected -- in late September 2005 -- but the principle elements of the new regime are established.

A new lifetime allowance will be introduced. This will cap the total value of an individual's pension at £1.5m from April 2006. This is planned to rise, in stages, to £1.8m by 2011. At retirement any sums in your Pension Fund above this limit will be heavily taxed. If your pension fund is already at or above the lifetime limit you will be able to protect your funds but it is highly recommended that you act now to protect your interests.

If you are planning to retire after April 2006 you will receive added flexibility as to how you may take a pension. For example, the first time, subject to certain reform of their current schemes, employees will be able to benefit from flexible retirement options. This will permit an employees to continue to work part-time whilst drawing their pension. Perhaps one of the most highly publicised changes is the revision of rules governing how property can be held in a Pension Fund.

Research has shown how attractive the changes to the new rules post A Day will be. In a recent poll by Paragon Mortgages of their existing buy-to-let investors, 52% indicated that they will definitely or may take advantage of the new Self Investment Personal Pension (SIPP) rules.

It is anticipated that such changes will pave the way for in an overseas property to become a permitted investment by and comprise an asset of a SIPP.

Gearing to make the purchase -- usually by way of bank loan or a mortgage against the pension fund -- expected to be up to a maximum 50% of the Pension Fund's value. This means, after "A Day", if you want to buy a property worth €250,000 you'd have to have €170,000 (or £122,000) in your Pension Fund. It will also be permissible, subject to limits, to add private monies to make a joint purchase with a Pension Fund. Effectively this means that a basic-rate taxpayer would be able to purchase a €250,000 home within a SIPP for just €195,000 with the Government paying the rest. The cost to a higher-rate taxpayer would be just €150,000.

For those with smaller funds to use all of your Pension Fund allowance to purchase a property may be too risky and prudence would suggest that only people with a large Pension Fund should consider making this kind of substantial acquisition.

Given that the costs of setting up and running a SIPP are reasonably high, they are unlikely to be the choice for the smaller saver. They are favoured by High Net Worth Individuals (HNWI) who will have received professional advice prior to establishing their SIPP and about its management once operational.