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Pensions changes set to affect housing market

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Major changes to the UK pensions market have come into force, with repercussions for the housing market expected.

From Monday 6 April, people aged 55 and over can withdraw any amount from their pensions, subject to income tax.

This is designed to make it easier to pass on any savings. Many people with existing defined benefits schemes will be allowed to transfer over to these new defended contribution plans.

At the moment existing annuity holders are unaffected but they could be allowed to sell their annuity in future.

Many believe pensioners and those retiring will withdraw cash from their pensions and invest in property, something which could push up prices and reduce supply for younger borrowers.

Last month Your Mortgage reported how Neil Lovatt, director at Scottish Friendly, said property was the most obvious investment vehicle for those drawing out of their pension pot.

“The baby-boomer generation has always had an unhealthy obsession with property,” he said. “This has been manageable, even beneficial to the economy when people slowly climbed the property ladder. But the new pension rules will essentially bankroll a generation, allowing them to buy into an already over-inflated market in the expectation that it will help fund their retirement.”

However, separate figures from LV= have shown as many as one million people approaching retirement age have an outstanding mortgage balance already.

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