The future of the pensions industry has been dealt a further blow as young people feel saving for property is more important than retirement.
A new study, conducted by Commercial Trust Limited, found that two age demographics; those aged 20-29 years old and those aged 30-39 years old, have been the only ones to record continued year-on-year market share growth for buy-to-let purchase applications since 2015.
“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,” commented Andrew Turner, chief executive at Commercial Trust Limited.
“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 added.
Turner points out that much was made of the April 2015 changes to pensions, commonly referred to as Pension Freedoms.
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 Commercial Trust 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.”