Pensioners the new buy to let investors?

Changes in pension rules announced in the recent UK Budget will give retirees greater flexibility about what to do with their pension pot. From April 2015, the over 55s will be able to access more of their pension immediately, and choose how to spend or invest it in a wider variety of options.

While media attention has focused on the potential for grannies to go and buy a Lamborghini with their pension money, in place of an annuity, there are plenty of others who are expecting – or at least hoping – that the funds will make their way into property investment.

The buy to let market could be one beneficiary. “Many agents and mortgage brokers believe people will increasingly turn to buy to let to provide income in later life,” says Letting Agent Today in a recent article. However, that does concern some in the property industry, who note that the property agency world remains essentially unregulated – meaning retirees could be easily persuaded to invest in a poorly performing asset, by unscrupulous agents.

The same article quotes Ed Mead, a London agent with Douglas & Gordon, who warns: “Agents will become guardians of peoples’ pensions. You will need to think seriously about who you hand your future to.”

Buy to let mortgage provider Paragon Mortgages believes the chancellor could go further in his reforms. It wants SIPPS – self-invested personal pensions – to be allowed to hold residential property within them. The firm’s managing director John Heron told Money Marketing: “Private rented property is a popular choice for private investors and could sit well in a personal pension arrangement because it generates a flow of income, has strong defensive qualities and has an excellent track record for producing good returns.

“Having given more choice to how we take our pension benefits, the Government should consider how we can be given more flexibility in building our pension savings and allow individuals to include in their pension the one asset that many investors regard above all others, an investment in housing.”

For one upcoming politician, with a specific housing problem of his own to solve, the latest Budget changes provide a perfect opportunity to keep the London housing bubble inflated. The capital’s mayor Boris Johnson calls the changes a “wonderful opportunity” that will invigorate bank of mum and dad – or even, bank of gran and grandad. And in his mind, that opportunity is for retirees to “find that sudden wodge of dosh that will enable them to help their children or grandchildren find a deposit”.

This is great news, says Boris, because the new funds coming into the market “will give developers even greater confidence to build more homes – and faster than they are now.” So hope there that another government policy will continue to stimulate the UK housing market – for better or, probably, for worse.

You can read Boris’s thoughts in full in his Telegraph column here.

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