Younger Generations Likely to Choose Property Investment Over Pension

Date Published 17 March 2018

The pension industry may have to cope with the news that younger age groups are more likely to save earnings to buy properties as their 'Golden Nest Egg', rather than taking up pensions for their retirement. Recent research undertaken by a leading commercial finance broker firm found that two age groups found between 20-29 years old and 30-39 years old, have recorded the biggest increase year on year in market share growth for buy-to-let applications.

Andrew Turner, the CE of the commercial finance broker, said: 'The figures suggest that younger people can see the value in investing in bricks and mortar – and perhaps this is an indicator that they perceive property investment as a sounder investment than pensions in the longer term.

'What is also interesting from these statistics is that rather than seeing an increase in buy-to-let applications from people reaching retirement age, we have seen a fall in market share from 2015 to 2017."

He feels that the April 2015 changes to pensions known as Pension Freedom, has had a negative impact on numbers of retirees investing in buy-to-let.

He continued: 'Under the old rules, people with a defined contribution were allowed to take up to 25% of their investment as a tax free lump sum and were compelled to purchase annuities with the remaining 75%.

'However, Pension Freedoms allowed people to use their entire fund as they wished, with speculation that this would lead to a surge in the number of buy-to-let investments from retirees, looking to receive rental income and potentially capital growth, to fund their retirement.

'Whilst the firm saw an initial burst of application activity from the over 60s in 2015, this has not been sustained through the two subsequent calendar years. Since 2015, the market share for this demographic has fallen from 25% to 18.8% for 2017.

'The biggest market share continues to come from those aged 40-49 years old, with three years of consistent application activity, which consistently accounts for just under a third of all purchase applications and has seen just a 0.8% fluctuation over the past three full years.'