Your pension could now fund a buy-to-let

In last week’s article, I mentioned that pension rules had changed in April so that you no longer have to take an annuity and instead could invest your pension pot as you deem fit.

This created a few e-mails and questions about it, therefore this week I’d like to look a little closer into the subject of your pension.

The pension reforms were announced in last year’s budget, giving people unprecedented access to their pension pot. Previously, you were only allowed to take out up to a quarter of it and were then forced to buy an annuity policy with the rest. From the 6^th April this year, anyone aged over 55 is allowed to withdraw as much of their pension pot as they like and spend it how they wish.

Whilst this immediately sounds like fantastic news (and caused some pundits to suggest retirees would all be visiting their nearest Lamborghini garage) there are serious tax implications you should be aware of.

As per the old rules, a quarter of the pension pot can still be withdrawn tax-free. Anything above this amount will be taxed as income. So if you took the whole lot out, the first 25% will be tax-free but the remaining 75% will be taxed at your income tax rate of 20%, 40% or even 45%.

Unlike the old scheme though, you are no longer forced to buy an annuity. Critics of annuity policies pointed out that when you died your annuity normally ended as well i.e. you had nothing to pass to your family.

Also, in recent years with the reduction in interest rates, the returns on offer from annuities have been woeful (Hargreaves and Lansdown suggest a 55 year old could now receive 2.2%+inflation or 4.4% fixed for life).

Compare this to yields in Chichester of between 4-5%, with rents that typically follow inflation and the huge bonus of owning an asset which, history suggests, will increase in value and, perhaps the biggest benefit of all, can also be passed down to your family.

I often tell those who ask me where to invest and what property they should buy that it depends on what they’d like to achieve. If you want to maximise your income and have less regard to capital growth, then areas with higher rental returns such as Portsmouth and Bognor Regis could work well, alongside a higher yielding property.

For many, Chichester offers a great mix of decent rental returns but with excellent scope for capital growth. It is also an area in strong demand from tenants, many of whom are relatively affluent and reliable in regards to paying their rent and looking after their home.

I’m not a financial advisor so can’t advise you as to what is the best thing for your pension. However, if you’d like to discuss my knowledge and experience of the various local property markets please get in touch.

(This article was featured in the Chichester Observer's property section on 21st May 2015)

Clive Janes, CRJ Lettings.  www.crjlettings.co.uk

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If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

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How has your vote affected house prices over the years?

In the run up to today’s election, I’ve been reading various sources about how house price growth has varied during each of the former Prime Minister’s terms.

It won’t surprise many of you that Tony Blair resided over the biggest ‘boom’ in house prices of any British Prime Minister since data began in 1955. Under his premiership from 1997 to 2007, average U.K property prices increased 211.3%.

At 21.1% per annum this, however, wasn’t the greatest annualised increase. That accolade is held by Conservative Prime Minister Edward Heath, who saw property prices increase 32.8% a year (totalling 123%) during his time in office from 1970 to 1974.

Another fact unlikely to shock you is that Gordon Brown is the only Prime Minister to have seen house prices decrease during their time in the hot seat. During his premiership between 2007 and 2010 house prices dropped by 7.2% (I was actually surprised it wasn’t worse than this, remembering the headlines from the ‘credit crunch’).

Since then, the coalition government has overseen an average increase in house prices of 11.8% nationally.

One report, however, demonstrated how drastically property prices in London have outperformed in this time. When David Cameron came to power in 2010, his new home (10 Downing Street) was worth £4,574,831. It has since leapt 38% in value, now being worth £6,312,292, according to Zoopla.

One generally accepted reason for the U.K’s continual rise in house prices is that we aren’t building enough new homes. Research from Knight Frank showed how housebuilding has been on a continual downtrend ever since the Seventies. This has culminated in David Cameron overseeing the lowest number of new houses built per year of any Prime Minister’s term.

With 80% of people thinking there is a “housing crisis” in the country, the urgent need for more housebuilding has become a political hot potato of this election, with housing becoming a core focus of all the parties’ manifestos. 

History suggests, however, that there’s actually little to choose between house price growth depending on which party is in power. My calculations suggest the prolonged increases from Tony Blair’s time in power has given a slight edge to Labour, with an average increase of 13.5% for each of the 24 years they’ve been in power, compared to an average increase of 10.8% for each of the Conservative party’s 36 years.

If you’d like to keep up-to-date with how the election result could affect Chichester’s property market, you can sign up for my weekly ‘Chichester Property News’ via the CRJ Lettings website.

(This article was featured in the Chichester Observer's property section on 7th May 2015) 

Clive Janes, CRJ Lettings Chichester, www.crjlettings.co.uk

___________________________________

If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.

E-mail me on clive@crjlettings.co.uk or call 01243 624 599.

Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:

Follow The Buy-To-Let Property Investment Market in Chichester

Chichester Property Market LinkedIn Page for Clive Janes

CRJ Letting Agents Chichester Facebook Page

CRJ Letting Agents Chichester Twitter Page

Chichester Investment Property Management Specialist CRJ Letting Agents Website

c/o CRJ Lettings, 30B Southgate, Chichester, West Sussex, PO19 1DP

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