Since 2001 the number of self-employed has risen from around £3m to £5m today. This is great but at a time where the self-employed are not yet compelled to save by auto-enrolment. (retirement).
The financial capability of individuals remains in question, experts have highlighted the possibility of an ‘impending pensions crisis’ for this growing sector of the UK labour force.
With no employer to fall back on, the self-employed are on their own when it comes to retirement saving. Irregular income patterns can make it harder to save regularly into a pension and commit to locking money away until age 55. Those who are building a business may see that as their biggest asset and prefer to invest in it rather than a pension. However, there is a growing feeling that something must be done to help the self-employed save for retirement. The Office for National Statistics (ONS) recently published figures on the wealth and savings of those in self-employment and they make pretty grim reading (retirement).
Build-to-rent profits off generation rent
Into the growing gap between social housing and home ownership the build-to-rent model has given property developers a new way to profit from Generation Rent. The number of Build-to-Rent homes complete, under construction and in planning across the UK has increased by 30% in the last year, according to the first annual data on the sector to be published. More than £2bn was invested in purpose-built rental flats last year – but this won’t do much to solve the UK housing crisis. In 2017, the build-to-rent market attracted £2.4bn in investment and is forecast to grow by a further 180% over the next six years. The attraction for large pension and insurance funds is clear – they have the capital to develop large blocks of flats, which are let out and managed long term by a single company rather than being sold to individual landlords. This provides institutional investors with a fairly stable, long-term income stream.
BTL investors – beating stricter rules
Stringent new rules for mortgage lending to buy-to-let investors with multiple properties are making it challenging for some to borrow to fund their businesses. Investors with four or more properties are affected as tough lending regulations were introduced by the Prudential Regulation Authority. Landlords who seek finance now have their entire property portfolio assessed for viability, as opposed to just the individual property concerned. As limited companies are unaffected by both these regulatory changes and the separate tightening of tax relief, it will be tempting for new landlords to choose this structure. Borrowing as a limited company will mean you pay higher mortgage rates and have the other administrative costs involved in running a company, but is likely to be cheaper in the long term. The downside, though, is that it would be very expensive for established landlords to transfer their portfolio to a company as it would create stamp duty and capital gains tax liabilities.
Financial Advice Including Pension Advice, Bristol
If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in Clifton, Bristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.
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