David Hannah, Chairman of Cornerstone Tax, considers the impact of the increase in the pension savings annual allowance and removal of a lifetime allowance charge from 6th April on the UK’s buy-to-let market.

With inflation standing at a 45-year high of 10.4 per cent, there has been a growing trend of Brits – most commonly those approaching retirement – turning to investing in property in response to concerns about the impact of inflation on their savings.

However, the scrapping of a lifetime cap on a pension fund which has been held at the same level for about 10 years announced in the Spring Budget may have a detrimental impact on an already strained buy-to-let sector.

On the one hand, I believe the measure is to be welcomed as we have the real prospect that people such as senior executives, entrepreneurs, and other high-earning individuals will have a no limits pot that they can put into, which is great, it will provide them with more flexibility and options for their pension.

However, this may have a knock-on effect on the buy-to-let market. Many people who were subject to this limit previously went out and invested capital in the private rental sector, because that was the only way to guarantee topping up their income, which otherwise would have been inadequate in retirement. 

What we probably need is a liberalisation of the pension funds and investment rules.

Now, individuals will have more options in terms of where they want to invest their pension, which could make buy-to-let investing less desirable. What we probably need is a liberalisation of the pension funds and investment rules. If all that money is going to flow into pension funds, it’s got to be invested somewhere. Why not liberalise how you can invest and allow you to invest in yourself or in private companies, because currently, you can’t do that. This could also see a rise in investment in small businesses in the UK providing them with a platform to grow – such as those in the construction sector which could aid the undersupply of properties.

The problem is going to be for pensioners who are already pensioners who don’t have any earned income anymore, they can’t take advantage of this – they will feel stuck with their current pension. For people in their 40s or 50s, who may feel that they’re underfunded, or their lifetime allowance wasn’t enough, they now have more opportunities whereas previously, they weren’t given a choice.