Since April 2015, the UK's over 55’s have had a much greater level of freedom with how they can spend their pensions.
Pensioners have always had the freedom to withdraw up to 25% of their pension in a tax-free lump sum but, since the Pension Reform, they can now withdraw the whole amount in a number of smaller lumps with 25% still being tax-free.
This has made a major impact on the buy-to-let market as more and more over 55’s who have concerns that they might not have saved enough for their retirement look to the returns that the property market can yield to fund their retirement.
Landlords are being offered the largest number of buy-to-let mortgage deals since the financial crisis started in 2008 and those at pension age are increasingly cashing in their pensions to buy properties
There are currently 1,000 buy-to-let products on the mortgage market that are aimed at this emerging sector of the investment market.
Of course, there are several things you should consider before using your retirement money for property investment. Factors such as entering a higher tax bracket and facing potentially larger tax bills are all concerns that need looking at with your financial advisor. Having said that, there is little doubt that property investments have gone from strength to strength over the last few years and they continue to outperform traditional forms of investment such as ISAs, bonds and equities.
What’s driving the growth?
Over the last 15 years, the UK population has increased by more than 5 million which is a lot higher than the supply of new homes. This is creating the need for more rental property.
In addition to this, student numbers across the UK have increased significantly and this has created a huge demand for PBSA (purpose-built student accommodation) that, for investors, can yield high returns which are virtually guaranteed.
If you throw into the mix the rising house prices and the lack of affordability for many first time buyers. It’s no surprise to see the rental market grow so rapidly.
In light of this, it’s easy to see why many pensioners are looking at buy-to-let and student property investment rather than ISAs, bonds, equities etc to fund their retirement. If you’re over 55 and considering using your pension to invest in property then check out the range of properties we have on offer.