The death knell for annuities sounded by George Osborne in the budget has already pension companies bemoaning the decision, but it has to be welcome as liberation for those with that good old substance called common sense.
For those of you who need reminding amongst the welter of facts from the chancellor’s budget last week, from next April savers aged 55 and above will be able to withdraw their entire pension pot as a cash sum, with the first 25 per cent tax free with the remainder taxed at the saver’s marginal rate.
From 2018, the minimum age people can access their fund will be 57, then it will be linked to rises in state pension age from 2028.
Unquestionably, this will see a huge boost in buy-to-let investing and it’s a good option for people who have saved over their working life to earn a rental yield that outweighs normal saving rates.
It is clear and sound logic for savers to use these pension windfalls to invest in property. Prices in property will carry on rising despite efforts to boost the supply with new building programmes.
Most polls are showing that property has increased by around seven per cent in the past year and our own survey of PIN members showed almost half expect property to double in the next 10-14 years.
Historically, property prices have been shown to double every decade or so, even allowing for dips, which are all part of the journey that is long-term property investment.
At pin we see the chancellor’s move as giving more freedom to the people to do what they want with their money. Sometimes we hear the term being thrown around ‘the nanny state’ which is pointed at successive governments’ failure to allow the people the freedom of choice they deserve.
However, giving us the opportunity to do what we want with our own pension money is certainly a step in the right direction.