David Cameron gloriously announced the Queen’s Speech “a packed programme of a busy and radical government”. Well, we’d beg to differ. You see, hidden inside all this pension reform there is an elephant in the room.
What will all these retiring baby boomers do with their unchained money pot if they choose not to buy an annuity?
There are, of course, many investment options open to them and the tax implications of withdrawing large sums make it somewhat inefficient anyway, but we just wanted to ask the question – What if?
What if bricks and mortar becomes the most appealing of all the options available to them? Buying a property gives them an asset which, as far as anyone can see, has been a more stable investment over the last 20 years than many banking fiascos. Furthermore, they can see where their money is, they can rest their hand upon it, they can say “this is mine, it belongs to me”.
What if the attraction of filling that house with young people or families that cannot afford to get onto the property ladder is an irresistible income source? Perhaps they used the pension pot as a deposit for securing a buy to let mortgage, the tenants will then pay the mortgage plus 15% on top which is theirs to keep. Maybe they take the tax hit and buy the house outright keeping all the rent every month as an ongoing pension payment.
What if after the runaway success of this buy to let venture they decide that they “should have done this years ago”? Perhaps they go out and buy another property to double the income generated, maybe more than one?
What if they end up buying 15 local properties which they fill with paying tenants, who have no choice but to rent, whilst generating them a healthy retirement income along with a portfolio of assets?
What if there are enough retiring baby boomers who choose this route? Put them all together and they will begin to hoover up even more of the rare and overpriced housing stock in the UK. How happy they will all be as they see the value of their assets continue to rise as the rental income pours into their accounts each month, their new pension plan paying off handsomely.
What if these pension reform measures price out everyone but the baby boomers? These empowered pensioners are then simply trading the nations housing stock between themselves inflating prices whilst everyone else struggles even even more to get onto the housing ladder – the people who need and want a home.
All this success thanks to a “busy and radical” government policy which is already falling over backwards to get the baby boomers votes at the expense of everyone else.
What if we can mobilise the generation rent vote in 2015? What if…