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Housing boom possible as pensions relaxed

Fri 25 Jul 2014

No Lamborghinis – but housing boom possible as pensions relaxed, warn experts

Research from Equiniti Pension Solutions, one of the UK’s largest pension administrators, shows that the property market is likely to benefit from the changes to pensions announced in the Budget.

The survey of 40 key annuity providers and pension experts carried out by Equiniti, showed that over 50% believe the housing market may be impacted as more people choose to ‘drawdown’ their cash rather than lock it up in an annuity. Only 8% did not think so. The rest were undecided.

However, only 18% of experts expected a buy-to-let boom. 36% expected no change but the majority (46%) were undecided, so the possibility should not be ignored.

Post-Budget the overwhelming view, 97%, was that we will see an increase in the number of pensioners cashing in their small pension pots. Furthermore, 87% also thought that as a result of the Budget, more pension savings will be withdrawn as lump sums are used for purposes other than retirement income. Based on this assumption and knowledge of what currently happens in the drawdown market it is reasonable to assume that property will be a direct or indirect beneficiary.

However, many respondents also raised concerns that an increased use of Drawdown could see pensioners exhausting their retirement funds, with 46% believing that over 20% of pensioners may use up all their funds and just 3% thinking no one would exhaust their savings. However, talk of reckless spending, the so called  Lamborghini Budget, was dismissed by half of the respondents, though 35% were of the view that some people would spend their money recklessly.

Brian Please, Business Development Director at Equiniti Pension Solutions says “Whilst the immediate focus for the customer approaching retirement, providers and advisers is to anticipate the direct impact on the retirement market. There will inevitably be significant knock-on effects to the property and other markets as a result.”