Retirees not put off by buy-to-let tax changes

The number of retirement customers looking to invest the tax free cash lump sum from their pension pots into the buy-to-let has remained constant this year, data from Fidelity International has shown.

From 6 April buy-to-let investors will have to pay an additional 3% stamp duty surcharge compared with residential buyers while higher-rate tax relief on mortgage interest will reduce from April next year to a basic 20% rate.

But Fidelity International said the raft of impending changes has done little to dampen the enthusiasm for bricks and mortar with 7% of Fidelity’s retirement customers using their tax free cash lump sum to invest in a rental this January – the same proportion recorded in the last six months of 2015.

Overall, property purchases remain popular with retirees – accounting for 14% of all usages of tax free pension cash in 2015 and placing it firmly among the top three options after reinvesting and topping up income. Out of this number, the split between buy-to-let and self purchase has consistently been 50/50.

Maike Currie, investment director for personal investing at Fidelity International, said: “The British love affair with all things property is well-documented and, for many retirees, buy-to-let is seen as a ‘no brainer’ investment given the spectacular rise in property markets, particularly in London, over recent years.

“But tax changes aside, the illiquidity of the housing market as well as costs in the way of maintenance, stamp duty, mortgage arrangement fees and a host of unpredictable outgoings can chip away at income. Not to mention the time and effort required to manage a property and the risk that it may lie empty between tenancies.

“Investing in property funds allows investors access to an income stream without the hard work and unexpected costs of a tangible property.Buy-to-let in retirement may work for some but with the added extras that come with it, it’s worth asking yourself, whether you really want to be managing a property in your eighties?”

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Ryan Fowler is the editor of Specialist Finance Introducer