What Does The Changes To Pensions Mean For Property?

Pensions are changing and for many people this means that they will be able to access their non-salary pension well before they retire.

For years it was the case that those with private pensions bought annuities. Basically this meant that the money they paid into their pension every month from their wages (and this was usually topped up by their employer) was put on the stock market and grown with a long term outlook. Instead of receiving this in one lump sum most people would get an annual income that would help them in their retirement.

However from April 2015 the rules will change and this will not only have an effect on how pensions are used and accessed but also on the property market as well.

The Pension Changes

The Chancellor of the Exchequer George Osborne announced in the 2014 budget that savers would be able to access their pension if and when they liked from 2015 onwards.

So basically there are now 3 main choices when it comes to occupational or private pensions. Savers who are 55 or over by April 2015 can withdraw the whole value of their pension at once, they can continue under the old scheme of using an annuity with a fixed income every year or they can leave it invested on the stock market and dip into it when required. For a lot of people who are experiencing financial hardship – perhaps they have lost their job – this access to money that would normally not be available until they hit pension age will be a welcome financial boost.

Precursor To A Property Boom 

The great news for the property market is that this is likely to be the precursor to a property boom next year. 

With people having direct access to money that they would not normally be able to use under the previous rules then a big chunk of this is likely to be invested in property. Even though the market has been volatile in recent years it still represents a great way to invest money and see good returns. The fact that 25% of the lump sum of a cashed in pension is exempt from tax is further proof that come next year many people are going to have much more money to buy and invest in property.

Your Mortgage Decisions director Dominik Lipnicki echoed this forecast that cashing in a pension and investing it in property represents a much more lucrative way of getting as much value of possible out of the new rules. He also affirmed that we will see a spike in the property market in the short term at least.

I Am The Agent has witnessed the steady rise of the property market since its historic low levels 6 years ago and the changes to pensions and how they are accessed is likely to benefit the market as a whole. The online estate agent specializes in selling, letting and finding properties for prospective buyers and manages to list properties without the huge fees of most high street agents.