Local Authority Pension Funds Back Rental Homes Investment Scheme

In the face of rising rents and the nationwide housing crisis, Hearthstone Investment Management has put together a £100 million fund to buy clusters of houses and low-rise blocks in areas where there is sold rental demand. The Hearthstone Residential Fund 1 has five local authority pension funds as cornerstone investors, including the West Midlands Pension Fund and Staffordshire Pension Fund. The other three backers are the local authority funds in Nottinghamshire, Derbyshire and Teeside. The fund will invest in UK regions, buying newly-built clusters of houses and low-rise blocks in areas of solid rental demand that appeal to families and young professionals. Read more on the Express & Star website.

Housing Wealth Will Be Crucial In Plugging The Pensions Gap

The UK is sleepwalking into a retirement income crisis that cannot be averted by pensions alone. The shift towards defined contribution schemes means millions of workers will run out of money in retirement. Those contributing eight per cent into defined contribution schemes throughout their working life will end up with just one fifth of the pension of an identical worker in a defined benefit scheme. While this would lead to an average worker accumulating a pot of £380,000 by the time they reach retirement, this only buys an annuity of £12,000 a year at current rates. What’s more alarming is that most defined contribution savers have not saved enough to even achieve this amount. Read more on the City AM website.

Treasury “Quirk” May Mean Housing Associations Topping-Up Staff’s State Pension

Housing associations could find themselves paying out extra to cover pensions costs thanks to a “quirk of legislation” that allows the Treasury to pass on the cost of state pensions reforms. The issue is of primary concern to local authorities, which would see £1bn added to their pension bill, but it could also impact housing associations and other organisations that make use of public sector pension schemes.  The Government has traditionally provided a top-up to the state pension to inflation-proof it against rising prices. But as part of the reforms to create a single tier state pension, the DWP will stop providing the top-up for some of the pension of those who reach state pension age after 5 April 2016. Most private sector employees will definitely be at the top-ups end but there is continuing uncertainty over the position of public sector employees and others who participate in public sector pension schemes. Read more on the Housing Excellence website.

Tories Kill Sheltered Housing & Landlords Don’t Even Notice!

Sheltered housing is dead due to Conservative housing benefit policy and social landlords haven’t even noticed this cataclysmic change to their business! Housing benefit in the social rented sector will be capped at the Local Housing Allowance (LHA) rate is the Conservative policy and the current average 1 bed sheltered housing property has a rent of £136.98 and the 1 bed LHA rate in Liverpool is £90.90 per week. The pensioner would therefore need to top up their rent from their state pension by £46.08 per week which is £2400 per year! The same situation will happen in most of England (though not London) and in Scotland and Wales as this change is a housing benefit policy and therefore GB wide. Read more on the Speye blog.

Inheritance Tax Cut Would Push Up House Prices

David Cameron’s plan to lower inheritance tax and compensate for it by increasing tax on the pensions of the wealthiest was described as being likely to complicate the system and raise house prices.  The prime minister promised to raise the inheritance-tax threshold for couples to £1 million with an additional £175,000 allowance for each partner when leaving their primary residence to their heirs.  The proposal was attacked by Paul Johnson, director of the independent Institute for Fiscal Studies as likely to push more money into housing. “It is rather odd to give this special treatment to housing, given that owner-occupied housing is already extremely tax privileged,” Johnson told the BBC. “Anything that does something like this, which increases the tax privilege associated with an asset like housing will drive the price up in the long run.” Read more on the Bloomberg Business website.