Retirement age to go up
It is no secret that one of the main reasons behind the upsurge in buy to let residential landlords has been the uncertainties in financial matters over the last 10 years. Earlier in the century, many contributors to orthodox pension schemes saw their predicted pension incomes slashed while others saw theirs disappear altogether in stock market crashes after 9/11. Then more recently the bank crisis and recession have had a similar effect, with more people than ever before becoming nervous of the traditional pension. Especially the younger elements of the population to whom the promise of a pay out in 40 years time when the average time spent in the same job is below 5 years, must seem light years away. Now of course, the contributions made by employers in nearly all modern pension schemes is far below the level of the final salary schemes that many employees received in the last century.
No wonder then that many entrepreneurs, completely new to the property business, have seen the opportunities in becoming residential landlords with the idea that realising their tangible asset at the end of their working lives will provide them with a pension in retirement. Of course there are strict legal standards to be met and difficulties with bad tenants and awkward council officers can be demoralising, but as long as the mortgage and landlord insurance is up to date, their pension fund is right before their very eyes and can be literally touched.
There could well be an earlier vindication of this plan as well. It seems more and more likely that the new Chancellor, George Osborne, will announce that the retirement age will increase from 65 to 66 in the year 2016 although current legislation states that this won’t happen until between 2024 and 2026. Furthermore, the Department of Works and Pensions has pointed out that the Office of National Statistics has revised life expectancy levels upwards, and many observers of Government policy are expecting Britain to have retirement age, thus the state pension payment, index linked to life expectancy in the near future, as is the case in some Scandinavian countries. Obviously the landlord who is looking at his property as an alternative pension will have the luxury of timing his retirement to an age that suits him and no-one else, of course he will have to wait for his state pension but his bricks and mortar pension will be in his own hands, which is the reason he took the decision in the first place.