In last year’s budget, Chancellor George Osborne announced changes to pension rules that would allow new pensioners to gain better access to their savings through cash in annuities. The changes will come into effect this month and will affect those saving into a workplace or personal pension scheme where the payouts are based on the performance rather than the final salary of the fund.
This will make it easier for pensioners to invest their savings into property, but some are concerned about whether this is a good idea or not. 400,000 people retire every year in the UK with annuity and experts have said that this will lead to a boom in demand for properties, further fuelling inflation.
Many pensioners have benefited from tax relief on the basis that they secure their lifetime income, almost guaranteeing that they will not have to fall back on state assistance. Pension pots that have been built over 30 years are estimated to have 32 per cent of their funding from tax relief, while for those who pay higher tax it could be funded by taxpayers up to 50 per cent, costing over £35bn per year. Some are arguing that this is fair and gives savers who were forced into annuities the opportunity to change them if they haven’t performed up to their expectations.
In basic terms, the changes will provide pensioners with a maximum lump sum withdrawal of £30,000 as opposed to the previous £18,000, and 25 per cent of this will be tax free. Those with smaller pension pots can take three personal pensions worth up to £10,000 each rather than the two up to £2,000 which were available before the changes. In addition, a workplace pension scheme up to £10,000 can also be made. While there are pros and cons coming with the new rulings, it could mean that there may be a shortage of properties available until more are built.
If you would like more information regarding buy-to-let and how you can begin your career as an investment landlord, contact our team today. We can advise you through the changes in London’s property market and ensure you get the best out of your property investment in Barnet or any other area of London.