From the 6th of April 2015, ‘Pension Reform Day’, new rules will allow those aged over 55 to draw down some or all of their money to invest in options such as a buy to let property. The requirement to buy an annuity will be removed and pension savers will have greater flexibility in accessing their pensions.
This could result in one of the greatest ever surges in the buy to let investment market as more and more people view property as a viable way to provide financial security in retirement. Various surveys estimate that 10% of people currently paying into pension funds say that they will invest some of their pension in buy to let property.With the Bank of England Base rate having been at 0.5% since March 2009 many see rental income and capital growth as a fair more attractive option than poorly performing annuities and savings rates paying less than inflation. The ability to purchase property as an investment will also appeal to those who wish to leave behind ‘bricks and mortar’ as an inheritance rather than see their pension pot simply disappear.
As specialists in the Property Investment sector we have seen an upsurge in retirees looking to invest cash within the Edinburgh property market. For most the appeal is that they have a solid annual yield, access to capital growth and take back control of their financial destiny.
Alan Fraser, head of Investment Property Agency, commented;
‘There is no doubt that that many retirees will see the pension changes as an excellent opportunity to take control over their pension pot and that many will look to invest in property. With pensioners no longer being rail roaded into annuities they will look at other investments which provide a better yield, long term capital growth and security for future generations. Demand for rental property in Edinburgh is continually strong and with the city suffering a property shortage buying the right buy to let property is likely to serve the investor very well. The effect of retirees buying investment property is likely to see prices in the Capital pushed upwards although it should be remembered that the majority of pensioners will struggle to find buy to let loans, due to upper age lending criteria, so most will be limited to outright cash purchases meaning few will be making multiple purchases.’
