Will Releasing Pensions lead to a lot more BTL

GeorgeHowell

With the Daily Mail saying it hopefully there's not much in it.

Pensioners who are preoccupied with leaving as much as possible in their wills might be tempted by buy to let because they think capital gains will be more than other investments. Those prioritising disposable income are less likely to go down that route.

But remember that this "flood" of cash looking for a home is not going to happen overnight -- it will only become available as people on defined contribution pension schemes retire. Other factors affecting property prices and savings interest rates will come into play over a period of time so the overall effect is, as always, unknown.

bigheadxx

chewmylegoff wrote: »

You've always been able to access the whole fund as long as you're prepared to pay 55% tax. Not many people do that and I doubt people will be tripping over themselves to do it at the lower rates of 40% or 45%.

People with a lot of money - eg £1m - in their pots have enough to buy a property outright with their tax free lump sum if they want to.

Most people will pay 20% though won't they? If you are a basic rate taxpayer with a £100,000 pot I presume you get 25% tax free, £20,000 plus £64,000 which is £84,000 (80,000/20%).

ruggedtoast

Sigh.

Boomers are already gloating their hands together and planning to fill their boots with Buy-To-Let.

What chance does a struggling young working person have of getting that first flat when Nana can just magic up £70k or more and fast-track a buy to let mortgage?

Next to none.


"And then you just sign here and thats the last starter home in the neighbourhood turned into a 6 month AST rental!"

chewmylegoff

bigheadxx wrote: »

Most people will pay 20% though won't they? If you are a basic rate taxpayer with a £100,000 pot I presume you get 25% tax free, £20,000 plus £64,000 which is £84,000 (80,000/20%).

So if you had £100,000 and took it all out in one go you would get £25k tax free and the rest would be treated as income for tax purposes. If you had no other income in that year at all you would pay about £20k tax on the remaining £75k, with the top £35k or so incurring 40% tax. Most sane people would be unlikely to do that in my view and would at least spread the withdrawal over two years to avoid paying 40% tax on a slice of it. Furthermore it's quite unlikely that someone with such a small pension pot would be in a situation where they had no other income - they would either have at least the state pension coming in, or if doing this before retirement then they would have employment income.

chewmylegoff

ruggedtoast wrote: »

Sigh.

Boomers are already gloating their hands together and planning to fill their boots with Buy-To-Let.

What chance does a struggling young working person have of getting that first flat when Nana can just magic up £70k or more and fast-track a buy to let mortgage?

Next to none.


"And then you just sign here and thats the last starter home in the neighbourhood turned into a 6 month AST rental!"

Do mortgage lenders make BTL loans to OAPs? Doubt it.

Linton

Another factor implying that the effect will be marginal, at least for many years, is that most retiree's pensions are pretty small. In 2010 the average size of a pension pot at retirement was £25K. So comparatively few people would have enough pension money to buy a BTL.

Thrugelmir

Carlos77 wrote: »

With the news of the changes in pension rules, and being able to release the pot rather than buy an annuity, do we think a lot of people will start taking the cash and investing in BTL property to get better returns than an annuity will give, and the additional bonus of handing it to the kids to inherit, rather than falling into a black hole once you die?

BTL or purchasing property outright? There's a fundamental difference. More tax efficient to keep the pension pot invested than buy a BTL.

bigheadxx

chewmylegoff wrote: »

So if you had £100,000 and took it all out in one go you would get £25k tax free and the rest would be treated as income for tax purposes. If you had no other income in that year at all you would pay about £20k tax on the remaining £75k, with the top £35k or so incurring 40% tax. Most sane people would be unlikely to do that in my view and would at least spread the withdrawal over two years to avoid paying 40% tax on a slice of it. Furthermore it's quite unlikely that someone with such a small pension pot would be in a situation where they had no other income - they would either have at least the state pension coming in, or if doing this before retirement then they would have employment income.

So you would get £80k Max if you had no other income. Spreading it over two years with just the basic pension as income would almost entirely negate the 40% tax rate.

Thrugelmir

bigheadxx wrote: »

So you would get £80k Max if you had no other income. Spreading it over two years with just the basic pension as income would almost entirely negate the 40% tax rate.

That's on the assumption that the new rules don't restrict the rate or level at which the money can be withdrawn.

Something I feel is getting overlooked in the excitement of the announcement.

bigheadxx

ruggedtoast wrote: »

Sigh.

Boomers are already gloating their hands together and planning to fill their boots with Buy-To-Let.

What chance does a struggling young working person have of getting that first flat when Nana can just magic up £70k or more and fast-track a buy to let mortgage?

Next to none.



"And then you just sign here and thats the last starter home in the neighbourhood turned into a 6 month AST rental!"

Yes the grey vote no longer refers to war heroes and will nor be bought off with 'winter fuel allowance' and free TV licences. The new grey vote are the boomer generation and they will do very well out of this.


http://www.bubblews.com/news/2691454-budget-surprise-is-not-surprising