New Age Pensioners: giving more control to over-55s.
The long-awaited and hotly-debated pension reforms have finally come into force today (6 April). Now, anyone over 55 years old will be allowed to choose what to do with their pensions; withdraw the total sum in one go, take small fixed amounts when they wish to, or choose to invest the funds in an annuity or elsewhere. The first 25% of the pension will be tax-free, although subsequent withdrawals will be taxed according to income tax bands.
There are the concerns over the level of control that over-55s will have over their money. Pensions minister, Steve Webb’s throwaway comment that over-55s could spend their pensions on Lamborghinis if they wanted, have exacerbating these concerns. But what is wrong with being able to choose what to do with our own, hard-earned money? Shouldn’t we be entitled to spend our cash on whatever we want? Besides, aren’t over-55s most likely to be considered with their money anyway? After all, they have already been diligently saving their pensions in the first place. If they wanted to spend it on designer sunglasses, bottles of Bollinger and sports cars (coincidentally the major components of a rapper’s music video), surely they would have done it by now?
Ipsos Mori recently surveyed 1247 adults aged 45-65 in the UK, and found that, out of those who are going to withdraw their money, 16% of respondents plan to invest their money in property. Fears about reckless spending are unsubstantiated, with this age group making smart decisions – saving, investing and treating themselves just a little.
It isn’t surprising that so many over-55s want to invest in property. The reasons for investing pensions in property are numerous and well known. Whereas most annuities will eventually cease to be paid, property will continue to return value until the asset is sold.
Rental yields may be relatively low in London (around 3-4%), but this is still attractive when compared to interest rates on savings accounts. Capital growth is still strong in London making it an attractive longer term investment location.
For those looking for better income over capital growth, it pays to look outside London. At the end of 2014, the average yield in Southampton was 8.73%. Manchester’s average yield stood at 7.98% followed by Nottingham in third spot with 7.67%.
Traditional auctions (not to be confused with conditional auctions) are the best way for cash buyers to purchase a property. The certainty and speed of transaction means that the risk of gazumping or a sale falling through is removed.
Cash buyers who would otherwise have their money earning 1% in a savings account while they wait for a property transaction to exchange can buy a house, exchange immediately and start benefitting from the property’s capital appreciation. With their newly available pension lump sum, over-55s are in a good position to buy at auction.
Online property auctions are a convenient way for over-55s to purchase property. For anyone thinking that over-55s are still in the analogue world, think again. In 2012, statistics collected by the Pew Research Centre found that half of those aged 65 and over are online and that 70% use the Internet on a daily basis. This figure is growing.
Social networking among users aged 50 and over are growing year on year. The number of sites aimed specifically at the over-50s are increasing and are varied, showing that more people of this generation are looking to the Internet as a convenient and accessible medium.
Margaret Maudsley, an 82 year old woman from Chorley and a self-confessed ‘silver surfer’, believes there are a “myriad of uses” for the Internet. She lists online banking, shopping, researching various products and booking train journeys as some of these uses, as well as researching her genealogy.
Bamboo Auctions (www.bambooauctions.com) offer the opportunity to view and purchase properties with ease, security and certainty. Buyers can search, download pre-prepared legal documents, arrange site viewings at specified open days and place bids on properties. Bids are placed online in real time and centralised auction lawyers are available to ensure exchange and completion occurs smoothly.
A study by McCarthy & Stone, a UK builder of retirement homes, surveyed over-60s about their Internet habits and found that 61% of respondents had bid on auction sites and 60% had searched for properties online. Online property auction sites like Bamboo Auctions point towards an exciting future for this generation, catering to the increased interest the over-60s have in online purchasing platforms and the greater freedom they have over their money.
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