Are homes now retirement cash machines?
Remember when a mobile phone was just that: a mobile phone? When it didn’t connect us to the internet, act as our diary or tell us when the next train is due? Much like our mobiles, the retirement world has changed. The old established view that our income in retirement will be based primarily on our pension will not be enough for most of us anymore.
We need a new way of thinking about retirement. For the majority of us, property is our biggest store of wealth. Yet property is currently used much less than pensions in retirement income planning.
It’s important to think more holistically about wealth to help us achieve the retirements we all want to have.
This approach is so important now due to combination of long-term trends and recent changes to pension and tax laws:
- We’re living longer and few of us will enjoy final salary pension benefits.
- 57% of over 55s recognise their pension is worth less than their property.
- Since April 2015 we can now access more of our pension from age 55.
- …but, recent changes to tax rules mean that it is arguably better to use property or other savings and investments first, saving pensions for later.
- Many of us will be able to leave pensions to our next of kin, tax-free.
It is clear then that the way we access property wealth and pensions wealth, and the ways we use it are becoming ever more similar.
By Philip Harper | July 2020
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