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Investing In Timber Is A Growing Market
August 24, 2009Article by Ray Withers
Anyone looking to make his or her money grow ought to consider looking at investing in timber
For 100 years, timber has outperformed the Standard & Poor’s index – one of the leading financial rating agencies.S&P’s figures show that timber is one of the few investments that have carried on growing through major economic downturns.
For UK investors, timber offers tax breaks that are unavailable in other sectors. For instance, most taxpayers can avoid capital gains tax once they have owned woodland for two years and the investment stays out of an estate for inheritance tax as well.Timber is also a good investment for demonstrating green credentials, especially after most of the world’s major countries voted to support reforestation in third world areas.
Reforestation is a program of planting new, sustainable managed trees in partnership with local villages in countries like Sri Lanka, Malaysia and Indonesia.The idea is that new forests are paid for by western individuals or companies to off sweet their carbon footprints. Managing and harvesting the forests provides much needed work for third world villages, which are paid to look after the investment and receive a small share of the profits.
Among the UK companies promoting ethical investments in forestry is Property Frontiers, an international property consultancy with two similar projects – in Puttalam, Sri Lanka, and Sabah, Malaysia.For £10,000, an investor can buy a plantation of 300 hardwood trees that take between six and 15 years to mature, depending on the timber variety – generally agar wood or teak.
The return on investment is staggering if an investor opts for growing teak over the longer term – with a return of up to £256,000 forecast for a cash input of £15,000.
Besides the CGT and IHT advantages, a UK investor can also wrap an investment in a self-invested personal pension plan (SIPP).For non-UK investors, even better financial benefits are available by investing in forestry through a qualifying recognised overseas pension scheme. (QROPS).
This operates in much the same way as a SIPP with the advantage that some QROPS allow bigger cash drawdowns than a UK pension scheme – 70% against 75% if a QROPS is based in the Isle of Man – and that the fund can grow in a more tax friendly environment than the UK.