Chancellor George Osborne dropped a bombshell for us all including those of us at Capital Fortune, on how in the future, people can manage their own pension pots. This Budget could massively boost the property market.
From April 2015,anyone who is aged 55 or over will be able to take their entire pension pot as cash. The first 25 per cent will be tax-free and the remaining 75 per cent of the fund would be taxed at the saver’s marginal rate. (ie at the rate you currently pay tax)
It replaces the old system of being forced into taking an annuity or drawing down income if you are wealthier.
It will see millions of people having access to billions of pounds and is a true revolution of the pensions system. Billions will be available to invest in different areas in any way people see fit in a huge boost to individual responsibility.
People will need to ensure their life savings do not run out prematurely being left to rely on the state pension. Many investment options will be available but it is being indicared that one option could be residential property.
Buy-to-let
We have over the last year, seen a growing buy-to-let market with strong fundamentals in terms of rising rents, high demand and falling void periods.Property has been rising steadily with increases of 7 per cent expected this year and next.
It could see a flood of older people onto the residential property market and we believe we can help.
The market for older borrowers is very difficult as many lenders offering pensioner mortgages will not lend to people over 70, or even as low as 65.
Taking professional advice is key to getting the best mortgage and making the most of your retirement cash.
Building societies have traditionally been better at offering deals to older borrowers but have cut levels in the last 18 months.
Housing deposit
Another option for retirees is to offer their children a housing deposit to get on the ladder. There is huge flexibility to take cash and dip into your savings for major life events.
There is a strong chance of greater inter-generational transfers, although experts are warning behavior is highly uncertain.
With Help to Buy aiding people getting on the ladder with 5 per cent deposits this could provide more help.
Rising prices mean housing deposits are still the key obstacle to house purchases.
Holistic approach
With huge pension flexibility people can start to think about retirement planning in more holistic terms including their property.
Should a remortgage fund retirement planning and income too and how does it interacts with pension pots?
With such flexibility comes risk and professional advice is utterly essential in such circumstances.
Nobody wants to run down their reserves too quickly and no one wants to leave cash sat in the bank earning very little.
There are pitfalls and possibilities for all in the pensions revolution and property will play a key part.
Start planning for your future now and speak to the experts to decide where your money is best placed.
