Pension Pots and Buy to Lets

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    Pension Pots and Buy to Lets

    I was wondering what the views are on the new Pension Rules for the budgets?

    Are we going to see more buy to let landlords? Is there going to be a huge flood of money buying rental properties and is that likely to have an affect on rental prices?

    Any views/opinions?

    Claymore

    #2
    The media seem to think so, makes sense as well.

    Will all end in tears..... a rush of inexperienced landlords, some of whom are inevitably going to blow their pensions on a combination of bad investment decisions and bad tenants. At the same time further driving up property prices. Not to mention the opportunities retirees with large lump sums present for con men. Be a whole dark industry growing up around it I expect.

    http://www.independent.co.uk/news/uk...s-9208759.html
    http://www.dailymail.co.uk/news/arti...-property.html

    In one fell swoop the chancellor has managed to further price the young out of the housing market and open up the possibility of sizeable chunks of the elderly losing their pensions by dumping them into a clearly emerging bubble, and all in the name of freedom of choice. Someone should give him a Darwin Award for Economics.... will win the Tory's a few votes next year though I expect, election induced myopia, the most common disease amongst politicians.
    I'm not a lawyer, what I say is the truth as I understand it. I offer no guarantee except good intentions.

    Comment


      #3
      Yes, I was thinking this will push property prices up and again, make it even harder for youngsters to get on to the property ladder.

      I can definitely see vulnerable people being ripped off.

      Comment


        #4
        I think I've read that the average pension pot is less than £20k. In addition money withdrawn will be subject to income tax.
        So it seems to me that the potential to withdraw a lump sum to buy a property in cash is limited. Is it easy to get a BTL mortgage at 65?

        This leaves these investments into new built blocks of flats, with all the risks.

        But the principle of this new measure is good, IMHO.

        Comment


          #5
          Originally posted by monkeysee View Post
          The media seem to think so, makes sense as well.

          Will all end in tears..... a rush of inexperienced landlords, some of whom are inevitably going to blow their pensions on a combination of bad investment decisions and bad tenants. ...
          .. ...
          Indeed:

          Those daft b*gg%rs may then apply to the state for assistance and be found to be guilty of "deprivation of capital" (or similar rules for the various benefits) and find they really are destitute... Still, should get Gideon some votes....
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            Not sure - can this not already be done via SiPPs, and it hasn't happened very much? I'd say that as large an impact will be because parents will be investing in giving large deposits to their children.

            I think the basic idea is excellent, in that it makes people more responsible for themselves.

            There are also natural limits in that it counts as income, so taxed at the marginal rate unless you find a tax deductiible approach. More than 40k in one year = 40%.

            As for house prices, imo the key continues to be supply and especially of land becoming available in the long term. I'd say we will be back to 200k houses per year in a couple of years.

            ML
            Refer Mad Regulators to Arkell vs Pressdram.

            Comment


              #7
              Originally posted by jjlandlord View Post
              I think I've read that the average pension pot is less than £20k. In addition money withdrawn will be subject to income tax.
              So it seems to me that the potential to withdraw a lump sum to buy a property in cash is limited. Is it easy to get a BTL mortgage at 65?

              This leaves these investments into new built blocks of flats, with all the risks.

              But the principle of this new measure is good, IMHO.
              All good points. I'm surprised at the average low level of pension pots. I know there is a rule where if your pot is of a low value - you are already allowed to take the whole lot. I myself have a few smallish pensions but lump them together, definitely enough to buy a property outright.

              I too think the principle of this new decision is good, but I can see lots of people who haven't got a clue what to do - making bad decisions. I can also see the reckless people who don't give a hoot, going on a mad spending spree and 5 mins later having nothing left to show for it - and then what happens? The tax payer picks up the bill with ensuring them a basic state pension topped up with loads of extra benefits.

              Comment


                #8
                The principle of giving people choice is definitely good. It's the potential/probable unintended (yet not unforeseeable) consequences which are troubling.

                With interest rates being what they are the one thing we can be sure of is that any released funds will be ending up anywhere other than a nice, safe, savings account.
                I'm not a lawyer, what I say is the truth as I understand it. I offer no guarantee except good intentions.

                Comment


                  #9
                  I don't think that it's particularly likely that a huge amount of money will go into buy-to-let because of this.

                  Firstly, from a tax point of view it would be nuts for anyone with a pension pot of any real size to draw down their entire pot in a one-er to buy a rental property as most of it would be subject to 40% or 45% tax.

                  Secondly, buying a rental property outright (as I believe is suggested) won't produce as good an income as drawing down share funds, and is obviously far more trouble than a share fund, although I can see it'd be attractive to those who are keen for their children to inherit something.

                  Comment


                    #10
                    A pension pot of 20K would not generate much after purchasing an annuity so let the people have it!

                    Private pensions have been a disaster for the majority. I predicted at the time of the collapse of Equitable Life that something along the lines of the budget statement would have to happen or there would be riots in the streets by baby boomers who expected more that £50 a month from their pension.
                    My hubby took out the pension, I bought property instead but could have done better with his pension pot (larger than 20K) if we could have got hold of it earlier.
                    I wonder if some pension holders will be strapped for cash when everyone demands the money?



                    Freedom at the point of zero............

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                      #11
                      My pension pot will be greater than 20K, we have decided to use it to pay off our mortgage. Then my OH can retire earlier on his company pension.

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                        #12
                        My private pension is one of the crap ones - not a final salary scheme or anything good like that. All along I've felt trapped by my pension. I started it at 23 and I earn an OK salary, I've always put in the maximum I can and my company doubles that - a few years ago I was told I could an extra 2% in and my company would match that too, so I did that as well... none of it 'cos it seemed a good deal, but because I felt trapped by it and it needed to be done for my pension to mean anything.

                        If I put in X% and my company puts in X x 2% you've got to think that's a good idea - but it probably isn't and my private company pension will be worth little - being then forced into buying an annuity makes me quite depressed about it.

                        If I could have taken my X% and had a little topper-up from my company of, say X% as well - not the X x 2%, then I would've have put it into a property. No second thoughts. Sadly not an option.

                        I get these statements through about my pension - projections about how well I'll be doing if things continue as they are - it always looks like a car crash. I am welcoming of anything that gives people choice to look after themselves and make their own decisions. If it's all blown, then they get the standard state pension - might be enough to insure the Lamborghini.

                        Comment


                          #13
                          I would expect an increase in cold calling by companies offering 'investment advice' for your newly available cash. It'll be the same companies that generated 'scams' from the PPI's, accident claims etc, all looking for a wad of easy cash from wannabe investors. Sometimes the general public needs protecting from itself. The folk with big money already (generally) know how to look after it, that's how they have it in the first place. The middle to low earners with thwarted ambition will falter at the first sign of complex investment. Pensions are rarely managed well, but are better managed than a 'free for all'.
                          I may be a housing professional but my views, thoughts, opinions, advice, criticisms or otherwise on this board are mine and are not representative of my company, colleagues, managers. I am here as an independent human being who simply wants to learn new stuff, share ideas and interact with like minded people.

                          Comment


                            #14
                            Originally posted by Interlaken View Post
                            I wonder if some pension holders will be strapped for cash when everyone demands the money?
                            That's an interesting thought. If they are it'll be the biggest own goal by the treasury since Brown sold all the gold at the bottom of the market.

                            Maybe this is ozzy's way of plugging a secret black hole - he's gonna use the tax he collects on all the withdrawn pensions to bail out the bust pension schemes. Not very likely but wouldn't put it past em
                            I'm not a lawyer, what I say is the truth as I understand it. I offer no guarantee except good intentions.

                            Comment


                              #15
                              Pension funds are not banks which lend or invest the money they got through deposits while remaining liable for the full amount deposited.
                              Pensions funds invest the money through investment funds, shares, bonds, etc and the value of your pot fluctuates. When you ask for your money or just change investments allocation they sell these assets and give you the proceeds, whatever they might be.
                              If an investment has penalties for early withdrawal, these penalties will stand.

                              As such I doubt very much that there will be a liquidity issue.

                              There could be an impact if everyone was dumping their investments at the same time, but I doubt this will happen.

                              Comment

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