Property portfolios are replacing pension plans
Traditional forms of pension building, seen by many as unnecessarily complex, have now been surpassed by the buy-to-let market as a route to saving and retirement funding. As the value of the UK's property holdings by investors fast approaches the value of the whole country's workforce pension savings, the trend towards property as a pension plan has now been boosted by the Government's recent change to pension proceeds.
New rules on pension funding
Since April of this year, new 'pension freedoms' were introduced by the Government. The change is intended to allow freer access to pension funds for those aged 55 and older, and offers 25-per-cent of the pot as a tax-free lump sum. This move has been seen by many as an opportunity to build a property portfolio in order to more independently control their retirement fund.
Britain's buy-to-let army
The growing popularity of rental property investment has led to a collectively owned £1.25 trillion of property, spread amongst almost 2 million small-portfolio landlords, which is fast approaching the £1.6 trillion amassed in traditional pension schemes. Indeed, the buy-to-let trend is still growing, in no small part due to rising rents and readily available mortgages.
Accidental landlord phenomenon
BM Solutions, one of Britain's biggest lenders to landlords and part of Lloyds Banking Group, noted the difference between 'professional' landlords – those who an average of eight properties that generate annual rental yields of £60,000 – and the 'accidental' landlord – an individual who did not intend to become a buy-to-let investor, but instead let out their former home or inherited property.
The importance of financial planning
With two in three landlords owning only a single property, one fifth owning three or more and less than one in every hundred considered to be a 'serious' landlord with 15 properties or more, the importance of forward planning in growth management is clear. Indeed, there are reports of increased interest amongst the long-term clients of financial planners, showing that buy-to-let property is now considered a solid arm of investment management.
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