Pension For Property – 2015: Pension & Buy To Let Boom?
The government has announced that they are currently looking to make pensions more accessible to recent retirees from April 2015. What does this mean and what is the current thinking for next year?
Well, from April 2015 pension savers will be given total access to their pension pot. Pensions under £30,000 will be able to be drawn in one lump sum at marginal tax rates. Pensions valued over £30,000 will be allowed to be drawn as a 25% tax free cash lump sum (as normal) and the rest of the pension pot can be drawn as income. This could be as one lump sum payment (on which income tax would be due) or to mitigate your tax bill, as an income over the following years.
Do you buy that Ferrari? Go on a round the world cruise? Put your pension cash into a property?
We think savvy savers will be looking to invest their pension cash in something tangible but also something which is likely to appreciate rather than end up wrapped around a tree or leave you with memories but nothing in your pocket. The property market seems an obvious choice.
It will be possible to use some or all of your pension pot as deposits on Buy to Let purchases. Most lenders will lend on a Buy to Let property up to age 75 and some even have no maximum age. Only this week we have seen a major Buy to Let lender increase their maximum age to 85 and amend their criteria to accept pension funds as a an acceptable deposit source. Lenders are gearing up for an expected increase and we expect many more changes to come from other lenders.
Therefore we foresee a boom in the Buy to Let sector from April 2015 as property is snapped up with a combo of pension pot cash and a buy to let mortgage.
Young people are finding it harder than ever to get onto the property market and some of the pension pot may also be used effectively as an early inheritance and a deposit towards a son/daughter or even grandchildren’s first purchase.
Lastly, you may just want to clear the mortgage on your main residence. Lenders have stringent rules about lending into retirement and you may have a lender who is being fairly uncooperative. Clearing your mortgage may help take the stress out of staying in your main residence.
From 2015 the world is your oyster. Just please think twice before you buy that Ferrari!!
The views expressed in this blog are those of Sarah Fox-Clinch, Director and broker at Fox Davidson. Tel 01173 736200. firstname.lastname@example.org