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U-turn on pension investments

Published:  23 July, 2008

UK wine merchants were dealt a nasty surprise this week when Chancellor Gordon Brown announced that fine wine investments would not be subject to tax relief when included in Self Invested Personal Pensions (SIPPs).

Monday's news came as a blow to investors hoping to set up a portfolio of fine wine as part of their pension and take advantage of an anticipated 40% tax break. However, in his Pre-Budget Report, Brown said that as of next April, SIPPs and all other forms of self-directed pensions will be prohibited from obtaining tax advantages when investing in residential property, and certain other assets such as fine wines'.

One merchant described the move as a complete bombshell', while Simon Staples, fine wine director at Berry Bros & Rudd (BBR) said the company was dumbstruck' at the news.

Berry's has adopted an aggressive stance on the SIPPs issue, even suggesting a range of wines for SIPPs investment, and contributing to price rises of First Growth Bordeaux of more than 20%. But after Monday's announcement, a statement on the company's website read: The proposed change had been on the statute book for 18 months, and so for the Treasury to change its mind a mere four months before implementation is especially disappointing. There is little doubt that this will temporarily take the heat out of the ebullient fine wine market.'

Staples added: We have a completely clear conscience over this, 100%. We were pretty shocked when we heard, but for prices, it doesn't make a difference, anyway. Very few people have bought wine to put in a SIPP.' He added that if customers wanted a refund, Berry's would be likely to act as broker for them, but a straight refund was unlikely'.

Merchants who held back on promoting SIPPs investments were equally surprised at the news, but believe that demand for top Bordeaux is driven more by Asian markets than pension investors. Gary Boom, chairman of Bordeaux Index, said: It's a complete fiasco for the people who were gearing up to do this, but we held back. We never had a single client who called to say "I'm buying this wine to stick into my SIPP".

Gaylene Thompson, sales director at Farr Vintners, pointed to pre-Millennium Champagne as an investment that did not work, while Mark Bedini, CEO of Fine & Rare, said that it was a good thing that a cluster of merchants didn't pile in and buy overpriced Bordeaux. If they had, we would have had large-scale stock dumping. Fortunately, only a few firms were involved.'