New pension laws could be a ‘game changer’ for property sector

The property industry could get a welcome injection of new capital thanks to changes to British pension laws introduced this week.

From 1 October, staff at the UK’s biggest firms will automatically be enrolled in a workplace pension, which both they and their employer will pay into. The move is designed to supplement the state pension and stem the decline in workers’ pension provision.

In time, more than ten million people will be enrolled in a workplace pension.

According to investment experts at property advisers Colliers International, this could result in a windfall for the property sector.

David Smeeton, an investment surveyor and head of the firm’s Birmingham office, said: “In the early days, the average contribution including company contributions and tax breaks will amount to £309 per head, which suggests a total rise in pension funds of around £3.1billion.

“Pension funds allocate an average of ten per cent to their property portfolios, which means an additional £309million could come into the system by next year.”

But as the contribution thresholds increase each year, by 2018, the figures will rise substantially.

Mr Smeeton said: “By then, the annual contribution will be £1,235 per person, or around £12.4billion in total. The ten per cent allocation would then amount to a very interesting £1.2billion per annum to property.

“At present investment volumes, this amounts to around five per cent of total direct property investment in the UK.

“At a time when property funding is hard to come by, and investment stifled, this could be a game changer for our industry.”