I’m sure, like me, you remember some of the analysis fuelled in part by then Liberal Democrat pension minister Steve Webb, who suggested pensioners would be taking out large sums of money from their pensions in droves in order to make big-ticket purchases.
Webb’s suggestion this might mean more pensioners driving brand-new Lamborghinis seemed to touch a nerve with many, although it could just have easily been purchases of buy-to-let properties. Indeed, it was widely thought that many pensioners would be taking out their 25% tax-free allowance to invest in property. ‘The rise of the silver landlord’ was here, we were warned.
The rather more frivolous purchases make for better headlines but there was some suggestion that people would immediately blow all their pension savings and would be left to rely on the state once their spending sprees were over, and they had no money left to fund their retirement.
You have a fast car?
At the time I thought such an apocalyptic view was ludicrous. The suggestion that people would spend their whole lives saving only to blow it all as soon as they could get their hands on it seemed to fly in the face of the sensible logic of saving into a pension in the first place.
Reading the latest figures on pension access, the Lamborghini-buying vision of the future seems incredibly far removed from reality.
The latest statistics show that, while £16bn has been flexibly withdrawn from pensions since April 2015, the average withdrawal per person in Q4 last year was just over £7,500.
That is hardly going to get you a high-performance sports car and, indeed in our market, probably not enough to put a deposit down on a buy-to-let property and pay off all the accompanying costs.
While I’m sure there will be a couple of examples of pensioners going wild with their cash, this is far from the norm.
In fact, the number of those accessing their money early is on the rise, but they are doing this sensibly and (as you might expect) with an eye on their current needs, but also what they might need from their pension in the future.
This is especially the case if they are, for example, only 55 years old, because the length of time they will need their pension income for could be many decades.
The initial furore, followed by the reality of the policy, shows how little credit the British public is often given.
And from a buy-to-let perspective, there was a significant volume of opinion that pension freedoms would hustle in a huge raft of ‘casual would-be landlords’, utilising their pension cash to buy properties.
The suggestion was that such activity would end disastrously for them and would ultimately push more property out of the owner-occupier space.
I happen to think some in the government of the time believed this, hence the series of ongoing reforms designed to dissuade anyone else from becoming a landlord.
As can be clearly seen, this hasn’t happened and one does sometimes wonder why the reality of a policy isn’t allowed to unfurl before those in power take further decisions based on assumed outcomes?
Just because people could do something, doesn’t mean they will.
If only some of those, who have fundamentally shifted the landlord experience in the intervening couple of years, could have kept that in mind we might have a very different set of market circumstances today.