On 6th April 2015 this government’s far-reaching pension reforms came in to effect, essentially giving people over 55 year of age with ‘defined contribution’ or ‘money purchase’ pensions, total and unequivocal control of how to spend or invest them.
Until now people that have pensions were controlled by law to purchase an annuity, drawing down a fixed sum of income to live on as a pension each year with the option of access to a tax free lump sum of up to 25% of the total pension value. Now, with the introduction of this new pension reform people no longer need to take an annuity and are able to withdraw whatever they want, with the initial 25% of all withdrawals tax free, the remainder will be taxed as income.
These reforms, anticipated by most pensioners, brought a mixed response from journalists and social commentators. They expressed series concerns that pensioners may be left with no money for their retirement but overlooked the freedom of choice. Others interested parties looked to the effect that these reforms would have on the property marketplace and the industry in general. The wide consensus of opinion was that many pension rich people would look to invest their pension in to the property market and particularly buy-to-let property, which in the industry is largely seen as safe, reliable and more profitable way to invest savings and pensions, in comparison with the performance of stock markets over the last decade.
In our opinion, over at Investinrooms, investing in buy-to-let property in the right locations and with the right product, may well turn out to be an effective way to increase the size of your pension pot and with appropriate tax relief, for example on buy-to-let mortgages, incurred costs for managing the property may well be off set against your tax bill. This would include lettings fees, furniture, insurance cover, maintenance and repairs, ground rent, council tax and bills.