People who have reached or are about to reach their retirement age are turning their back on downsizing and instead opting to use their pensions to make buy-to-let investments.
According to research released by Prudential, 20% of homeowners over the age of 55 said that they would consider making buy-to-let investments. The intention among most of the surveyed groups also stated that they would later take over occupancy of the homes.
A total of 32% already with buy-to-let investments said that they were thinking about moving into their properties at some point in the future.
However, when they were asked how they planned on funding their investments, around 52% of those interviewed stated that they would use their pensions.
Stan Russell, who works at Prudential as a retirement expert, comments: “The fact that older people are now choosing buy-to-let as funding for their retirement is quite interesting. Still, this is understandable considering the post-pensions freedoms world we currently live in.
“However, there are many risks that anyone looking to use their pension savings should know about. These risks are universal, irrespective of the reasons given for using such savings.”
Following the introduction of pension freedoms last April, individuals over 55 years can now access the money saved in their pension schemes without buying annuities.
Russell further advises “the easiest approach most people wishing to increase their choices while securing their ideal retirement home is to start saving into their pension plan at the earliest opportunity”.
From April 1, 2016 those investing in buy-to-let properties are being charged an additional 3% on the previous SDLT (stamp duty land tax). This new charge was announced during the Autumn Statement released last November.
The government launched an investigation in the new SDLT rate in December 2015. Currently, it has been analysing the feedback that was issued by the consultants involved in the investigation.
Overall, however, increased land tax or not, most citizens aged 55 and above still maintained that they were seriously considering investing the funds in their pensions – specifically in the purchase of buy-to-let properties.