Pension From Letting

  • In times of low interest many pensioners opt to invest in property.  See silver landlords.
  • The reasoning is based on the historic reliability of the property market- hence the phrase bricks and mortar.
  • At retirement any pension-fund asccumulated over a working lifetime prior to 2014 would allow a pensioner within a pension plan to enjoy a once-in-a-lifetime option to buy an annuity.
  • What is an annuity – essentially, a stash of cash used to buy an income for the remainder of anyone’s life, following a  50th birthday.  The rules are government controlled.  Insurance companies calculate any likely life expectancy and offer an income based on the value of the cash stash.
    The fund owner is allowed a 25% lump- sum to do with as they please; the remaining 75% is mandatorily invested in an income.
  • Essentially, there were winers and losers resulting in gross fortune or misfortune based on chance market conditions at the point of retirement.  This was exacerbated by any lack of index linking resulting in a declining value of the pension value in real terms.  An apple costing 50p at the start of retirement could increase to £2.50 prior to death with no increase in pension to reflect this.
  • In 2014 the coalition government, under the chancerllor George Osborne, introduced new measures enabling the entire fund to be invested at the owners discretion.
  • This relaxation of rules means yet more pensioners are likely to be able to invest in property.
  • Before rejoicing too loudly this has an impact on the yield from rental income.  If everyone is in the same businesst creating more choice then more competition will lower rents and thus retirement income.  Simple?  Not really!

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