As a result of last week’s budget, new rules come in to force from today allowing pensioners to draw down large amounts of money from the pensions to spend how they like. Despite headline grabbing stories warning about a glut of spending on fast cars the more realistic result of this is an increase in buy to let investors. The reason for this is investing cash in the right buy to let property is a great alternative to the annuities alternative. As of today, pensioners can take more of their cash up front (all pensioners can take up to £30,000 as a lump sum up from £18,000 and as long as your pension can deliver you £12,000 a year then the lump sum you can draw down is now unlimited) and by April 2015 everyone will be able to take as much as they want from their pot. This has huge ramifications for the buy to let market given how strong an investment buy to lets have proved over the years especially in Edinburgh for the following reasons:
- The property market in Edinburgh has held up remarkably well through the financial crash and recession and buy to let properties bought in the right areas of the city are safe and strong investment.
- Ignoring capital growth in property, buy to let investments in Edinburgh are returning yields of 5-7%. This outperforms many alternative investment options before we even look at capital growth.
- These changes to pension rules will stimulate capital growth again in the property market. This will come from increased investment from buy to let investors and from parents providing additional cash to their children to enable them to get their foot on the property ladder.
- The ease with which these investments can be made. The Edinburgh buy to let market has been extremely stable over the last few years meaning the right investment can be found quickly and easily to match the investors budget. There are three investment scenarios (or budgets) that we use as a starting point, £100,000, £200,000 and £300,000. Starting with the budget immediately filters the list of correct investments and focuses efforts in the right areas resulting in quick and proven investments that provide a rental return within weeks.
A buy to let investment in Edinburgh is a great alternative to a pension annuity. If this is something you are considering, get in touch with us today and we can discuss numbers and prospects with you. It goes without saying that the sooner you invest the more advantage you will be able to take of capital growth that will result from the pension changes.