Pension reform 'to boost house prices': Over-55s could cash in on buy-to-let market
03-12-2015
• From April 6, anyone aged over 55 can withdraw all or part of their pension
• Will be able to spend it as they wish - rather than having to buy an annuity
• Experts believe pensioners will invest money in buy-to-let properties
• Could push up house prices and make it even harder for first-time buyers
By Louise Eccles for the Daily Mail
New pension freedoms could spark a property boom this year as the over-55s cash in their retirement savings and invest in the housing market.
From April 6, anyone aged over 55 will be allowed to withdraw all or part of their pension and spend it as they wish – rather than being forced to buy an annuity.
Experts believe this will lead to a rise in 'silver landlords', as people use their pensions to invest in buy-to-let properties.
This in turn could push up house prices and make it even harder for first-time buyers to take their first step on the ladder, they warn.
Experts believe that the pension reform - to take effect on April 6 - will lead to a rise in 'silver landlords'
Experts believe that the pension reform - to take effect on April 6 - will lead to a rise in 'silver landlords'
Estimates suggest that as many as 50,000 people could use their pension to buy a second home this year alone.
But critics warned it is also a risky option, leaving people entirely reliant on the unpredictable housing market for their retirement income.
Mark Hayward, of the National Association of Estate Agents, said: 'There are no doubts we will see a feeding frenzy, with many of those with large pension pots cashing in their lump sum and putting it straight into property.
'This will have a massive knock-on effect on first-time buyers already under pressure, in competition with cash-rich buyers heading straight for the buy-to-let market. We still have an under-supply of housing and this movement is likely to fuel further house price inflation.'
Financial firm Hargreaves Lansdown predicted that as many as 400,000 people will cash in their pensions this year, with 50,000 planning to invest in property.
Next month anyone aged over 55 will be allowed to withdraw all or part of their pension and spend it as they wish – rather than being forced to buy an annuity
Neil Lovatt of Scottish Friendly, an investment company, said the new pension rules will 'bankroll a generation'.
'Throughout the eighties and nineties the baby-boomer generation fuelled the housing market to such an extent that property ownership is quickly becoming the preserve of the old and the rich,' he said.
'Now they are getting a second bite of the cherry and could well tighten their grip on the property market so much that generations of children will find it difficult to buy.'
But he warned that the buy-to-let market can be unpredictable and would leave some pensioners 'high and dry' if they put all their money into housing and the market 'turns against them'.
David Hollingworth, of mortgage broker London and Country, also warned of the tax implications, with the first 25 per cent withdrawn from pensions tax-free but the remaining 75 per cent taxed as income.
'This means people could be taxed up to 45 per cent on three-quarters of their pot if they withdraw a large lump sum,' he said.
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