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Last Updated: Friday, 21 October 2005, 03:47 GMT 04:47 UK
Row over 'pension homes' scheme
Rural homes (Picture courtesy of
Defra ministers worry that rural house prices will be pushed higher
A government row has broken out over plans to let people buy second homes as part of their savings for retirement.

Ministers for rural areas warn the policy could push house prices further beyond the reach of many people living in the countryside.

They will meet Treasury counterparts to discuss concerns.

Under plans due to be introduced next April, property investors will receive income tax back as with other investments in pensions.

BBC correspondent Tom Heap said that, in effect, this could lead to higher rate tax payers paying 40% less than a local who needs somewhere to live.

There will be some restrictions, including such homeowners having to pay rent into their own pension fund when staying at their investment property.

But the property business has reported strong interest in the scheme.

'Wrong message'

Rural Affairs Minister Jim Knight has spoken to Treasury Minister Ivan Lewis about ways in which the policy could be adapted.

There are people all over the country in urban areas and rural... who are struggling to find a first home
Rural Housing Trust

The Department of Environment, Food and Rural Affairs (Defra) is keen to see second homes bought as part of the pension scheme rented out at low cost to key workers.

Influential rural figures fear the policy will widen the gap between incomes and house prices in the countryside.

Moira Constable, of the Rural Housing Trust, said the proposal sent out the wrong message.

"There are people all over the country in urban areas and rural, but my interest is in rural [people], who are struggling to find a first home," she told BBC News.

"They read that this government is offering tax breaks to people who can go and scoop up second homes, holiday homes, all the things that are contributing to the rural housing problem."

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