Pensions and Buy to Let
Tuesday, March 24, 2015
The Pension Reforms
Brokers believe the pension reforms announced in the Budget could trigger a surge in buy-to-let investment and an increase in the number of borrowers paying down interest-only mortgages.
From next April, savers aged 55 and above will be able to withdraw their entire pension pot as a cash lump sum, with the first 25 per cent exempt from taxation and the remainder taxed at the saver’s marginal rate.
The minimum age people can access their entire fund will rise to 57 from 2018, then be linked to rises in the state pension age from 2028.
Your Mortgage Decisions director Dominik Lipnicki says: “This is a potentially dangerous policy because people are saving to have an income over 25 to 30 years and I think we will see a large number of interest-only borrowers using that cash to pay off their mortgages.”
“Without a doubt we will see a boost in buy-to-let investment as a result of the pension system changes. It is clearly a good option for someone to be able to use the cash they have saved over their working life to earn a rental yield that outweighs normal savings rate.”
John Charcol senior technical manager Ray Boulger says: “There is a definite logic to savers using their pensions windfall to invest in property. House prices will continue to rise despite the efforts to boost supply, and I think those who are smart enough to save a decent amount over their careers will also see the sense in property investment to gain
If you are considering using your pension to buy a property to receive rental income during retirement then avoid any pitfalls and get a building survey or property condition report from the experts. Give AV surveyors a call and we will be happy to help.