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Property v pension – how the 2015 pension law reforms will change the face of retirement forever

May 7, 2014Article by Ray Withers

The last UK budget announcement included some exciting news for those approaching retirement age and planning what to do with their pensions. Now that the financial dust of the Chancellor’s announcements has settled, the full impact of the pension reforms, which are due to come into force in 2015, are beginning to be understood.

Freeing up UK pensions

From April 2015, retirees will have a great deal more freedom to use their pension funds as they wish. The government’s planned changes will make it easier for pensioners to access their cash, with the lump sum withdrawal amount increasing from £18,000 to £30,000. At the same time, the tax on this amount will be cut considerably – 25% will be tax-free, while the remainder will reduce from a 55% tax rate to the pensioner’s personal income tax rate.

As someone who has long been passionate about property as an investment, seeing these changes has been extremely pleasing. Instead of compelling pensioners to buy an annuity, which can be a stressful and (if the wrong one is purchased) costly decision, the new rules will provide vastly more freedom for those looking to gain an income from property during their golden years.

Property v pension

The British enthusiasm for purchasing property is well known, but the opening up of this market to those approaching retirement age is expected to give the property sector a dramatic new lease of life.

Property website Property Moose recently conducted a survey of UK consumers in order to assess their appetite for property purchases in light of the new reforms. It found that 54% of respondents felt that residential property provided a better investment option than a pension. Just 11% felt that a pension was a better investment than a property.

Interestingly, the same survey showed that only 10% of respondents had an existing direct investment in a property (other than that in which they lived). The findings clearly demonstrate the pent up demand for property investment that the current regulations have created, meaning that the impact of the changes in April 2015 should be dramatic.

Capital investment

The majority of respondents (57%) cited their reason for not investing in property thus far as being lack of initial capital. The pension reforms should act as a game changer in this respect. With high quality buy-to-let investment properties available for as little as £50,000 – such as Property Frontiers’ prime city centre apartments in Bradford, which also offer 50% LTV developer finance – retirees will have the option to achieve both equity and regular income.

With our apartments in Bradford, as well as our luxury waterfront apartments under construction in Liverpool, the properties are offered at below market value, meaning that investors gain instant equity from the development. With gross yields guaranteed (8.5% in year one for the Liverpool apartments, for example), those looking to make property work for them as an income source in their retirement years can plan their financial returns well in advance.

While I will be keeping a very close eye on the implementation of the planned pension reforms as 2015 approaches, certainly the excitement already generated by them in the property sector is palpable. The market is going to see some interesting developments from April of next year onwards.

Investors wishing to know more about the benefits of investing in buy-to-let properties in the UK’s leading cities  are invited to contact Property Frontiers or call +44 1865 202 700 for further details.


Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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