Has George Osbourne launched Pension billions into the PRS?

Has George Osbourne launched Pension billions into the PRS?

10:13 AM, 20th March 2014, About 10 years ago 25

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I hear that the Chancellor has changed rules on pensions today. From April 2015 the over-55s will be able to do what they like with their funds. With the demise of Annuities surely there will be a rush into property. What will be the impact?

Here are 2 quotes from the BBC web coverage:

“A massive reform of pensions has been announced by the government which will change the way many people fund their retirement.”

“The government is consulting on the rules which will apply from 6 April, 2015, but it is expected that you will be able to take your entire DC pension savings as a lump sum and spend or invest it as you like, as long as you are over 55. “

I don’t know much about Annuities but it seems that rates can be less than 3% if you choose to have your payments rise with inflation. Then the money is lost after you die. Not an attractive scheme. In contrast buying an unremarkable property to let should yield about 6% gross and say 4 to 5% net after costs and voids etc. Rents are vaguely inflation proof and the asset is retained by your estate.

I’m sure these numbers can be challenged and there will be regional variation on the property side. However, the picture would appear to show a large influx of new landlords.

Do you agree with this analysis? What impact will it have on the Private Rented Sector? Will the first time buyers get squeezed out even more?

Thanks

EdPension pot


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Comments

Ian Ringrose

16:27 PM, 21st March 2014, About 10 years ago

Remain,

Because the money they put into the pension was from from untaxed earnings, it is only getting taxed once. The tax is just delayed until the money is taken out. A lot of people pay a lower rate of tax in retirement.

All money taken out of pensions is taxed (apart from the 25% lump sum), there are lots of rules at present about the rate you can take it out, Osborne is talking about removing most of these rules.

AllanW

21:29 PM, 22nd March 2014, About 10 years ago

Thinking at a personal level her, as someone paying into a pension to try and get below the 40%.

There is mention of paying 20% tax when taking more than 25% out - Does anyone know if 20% is the maximum or will it be at whatever my current taxable income level is at the time i take it? - hence 40% in my case.

A second question does anyone know if its a withdrawal of 25% per pension pot or the combined pension funds invested?- Guess who has more than 1?

Cheers
Allan

Ian Ringrose

22:27 PM, 22nd March 2014, About 10 years ago

Reply to the comment left by "allan wadsworth" at "22/03/2014 - 21:29":

The amount you take out is taxed as income, so if it puts you over the 40% limit it will be taxed at 40%. However you can choose when to take the money out, if the new rules do come in, you don't have to take it all on in a single year.

I think it is 25% of each pension pot. However you can combine pensions together into a single SIPP at any point.

23:15 PM, 23rd March 2014, About 10 years ago

Reply to the comment left by "Ian Ringrose" at "20/03/2014 - 11:43":

Unless I'm missing something hopefully that is incorrect. I don't think there were any rules announced stating the benefit applies to people with a £12k pension provision (I thought quite the opposite was implied--no restrictions just marginal tax). And if anything the annuities will get more expensive (IFS I think have said so) - because only those expecting long lives will see them as valuable.

Industry Observer

8:55 AM, 24th March 2014, About 10 years ago

This is drawdown as it already exists, hugely complicated (to my little brain thank God for my IFA!!) and yes it is 25% tax free of each individual pot making up the overall, in my case, SIPP

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