The 2015 Government: What Options Do Pensioners Have for their Financial Structure?
For the past two weeks, The Budget 2015 was making headlines, with support and opposition from other parties, big businesses, everyday citizens and other countries and they have not been shy to express their views on the financial conditions of the UK.
Simply put, the budget is compiled and presented by the Chancellor of the Exchequer, George Osborne and the HM Treasury team, it identifies key areas of the economy and public finances that require a change in their financial structure. This budget affects the country as a whole, from all types of businesses, pensioners, students, transport, and more importantly, your savings.
What does the budget mean for pensioners?
The budget outlines four major groups of pensioners, along with changes for the next year:
Current and future pensioners should be glad that their state pensions are on the rise, although not by much, it is still a small victory.
The pensioners who have been able to save throughout their lives will be at an advantage, as they will have more financial freedom than those solely relying on state pensions.
A surprising policy Osborne outlined is the freedom pensioners will have regarding their pensions.
This is a big win for those approaching pension-hood as people will have more freedom and flexibility to do what they like with their pension funds.
With access to more cash, pensioners with their own savings can look at ways to increase their income. Most popular investment options for pensioners are the FTSE All Share Index, government bonds, ISAs, property, and doing nothing with their cash.
With the popularity of Buy-to-Let, this option gives pensioners the opportunity to become landlords. A fool-proof way of making sure your money is tied up in something tangible, it makes it more appealing to people who have a low tolerance for risk and would like the option of liquidating assets on their own terms.
What are the other reasons for investing in property as a pensioner?
- Alternative to volatile and underperforming stock markets.
Many pension funds are linked to the stock market, meaning, if the stock market performs poorly, so will your pension fund. Investing in property, you can target your property portfolio in growing markets, and away from the fluctuations of the stock market.
- Avoid hefty pension fund fees
Many pension funds and independent financial advisories charge significant fees and commissions to manage your investments, which can reduce the value of your pension pot. By controlling your own pension and investing in property, you can avoid these charges and increase the value of your pension pot.
- Income and growth
When investing in a property, capital growth will not only be achieved through capital growth, but also by monthly rental from tenants. If you invest in several properties, the monthly income from your tenants maybe enough for you to live off, thereby increasing your capital growth after retirement.
- Ditch the annuity
Annuity rates (the rate of return associated with a certain type of annuity), are historically low, floating around the 4% mark. This was once a popular option for retirees, but with so many alternative investment options it is becoming more unattractive. Another flaw with annuities is that you would forfeit any further growth of your pension. Investing in property allows you to have a steady income as well as growing your capital.
- Increase the power of your pension
By investing your pension in property, you are more likely to be approved for a loan of up to 50% which could increase the potential of your pension pot, and by charging rent, your tenant will be paying off your mortgage. Other options include investing in companies likeCrowdLords which requires no mortgage, but you will still be able to gain the benefits of a regular income which will also increase the value of your capital.
If you would like to know more about the Buy-to-Let market, investment options or you would like to be your local property mogul, get in touch with us through our contact page.
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