How Newton's third law applies to pension freedoms
The prospect of all that lovely money flooding out of pensions in April has got estate agents and cruise companies rubbing their hands in glee, but not everyone will be a winner from pension freedom.
Issac Newton taught us that for every action there is an equal and opposite reaction.
And it seems that for every benefit pension freedoms will afford the over-55s who are being allowed to access their pension, there will be a counterbalance where others will be negatively impacted – and those others are likely to be younger generations.
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Let's take the very worrying example of what's going to happen to house prices. Yes, many older people may raid their pensions to provide housing deposits for their children but there is expected to be a wave of pensioners happily skipping into the buy-to-let market.
Experts believe as many as 50,000 people could be waiting to jump on the landlord bandwagon next month. This may not sound like a lot but when you consider that they'll probably be targeting the same properties a first-time buyers the numbers make a big difference.
According to the Mortgage Advice Bureau the average buy-to-let buyer comes to the table with £100,000 meaning they will be first in the queue when it comes to snapping up property. Younger would-be homeowners just don't stand a chance against the pensioners and will more than likely be forced to go back to renting from one of the silver landlords.
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Broader context
If you consider the freedoms in a broader context then it's very likely that older will trump younger once again.
While older people may use the freedoms to blow their pensions on holidays and new conservatories, it will be younger generations who will be left to pick up the bill.
Alongside the pension freedoms, pensioners have also be afforded a 'triple lock' on their state pension which means it will rise at the highest of inflation, earnings or 2.5%. This is a huge boost to pensioners and one that has shielded them from austerity cuts felt further down the generations.
You could say that pensioners are getting the best of both worlds, given access to their personal savings and also provided with an inflation-beating state safety net.
And when this older generation of spendthrifts needs long-term care, just who do you think will have to pick up the bill? You be rest assured it won't be those who have spent their pension, it will be another cost to add to the bill those of working age are picking up.
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Read more:
Have pension freedoms broken Britain's social contract?
Tens of thousands of people locked out of pension freedoms
Pension freedom: don't expect to get your cash in April
