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Retirement Savers to Consider Property Investing

Retirement

Retirement

Pension Regulation Changes Cause a Third of Retirement Savers to Consider Investing in Buy-to-Let Property

New analysis by Direct Line for Business (DL4B), the small business insurer, reveals that a third (32 per cent) of people aged 45 – 64 with a pension would consider using some or all of their pension pot to fund the purchase of a buy-to-let property as an alternative to a traditional pension income funded by an annuity.

Reasons for Retirement Investing

Income (43 per cent), investment security (23 per cent) and capital appreciation (17 per cent) most frequent reasons for investing
12 per cent of potential buy-to-let investors favour the investment because they would like leave it as an inheritance for their children
Those approaching retirement anticipate an average yield of 13 per cent on their buy-to-let investment

DL4B’s research has highlighted that the number of ‘silver landlords’ could increase significantly given the changes in pension regulation which mean that from April 2015, people approaching retirement and pensioners will be able to access as much or as little as they want from their pension pots.

Property Lettings Expert, Kate Faulkner said: “Buy-to-let is becoming an attractive option for people, especially while property and rents rise. It can deliver some great returns over 15-20 years. Given the recent pension liberation announcement, for some it could be good to diversify their investments when approaching retirement, but landlords need to seek financial/expert advice and ensure they understand the returns that property can deliver and especially the tax implications.”

As property and rental prices continue to rise, buy-to-let can provide a regular income flow while also offering the opportunity for capital appreciation. The research shows that the main reasons for considering this investment given by potential ‘silver landlords’ was that it produces regular income (cited by 43 per cent of people), the perceived security of the investments (23 per cent), and expected capital appreciation (17 per cent). One in ten (9 per cent) potential buy-to-let investors favour the investment because they would like to invest in something that will allow them to leave an inheritance to their children.

The research highlighted the perceived high returns available for landlords as those approaching retirement anticipate an average (median) yield of between 10 per cent and 14 per cent on their investment.

Jazz Gakhal, Head of Direct Line for Business explained: “Buy-to-let can be a flexible investment, providing an immediate source of income as well as being a long term asset. As such, it is understandable that people approaching retirement age are considering investing their pension pots in property. However, prospective landlords should understand that buy-to-let does not come without financial risk.

“Legal expenses for repossessions and potential damage to property are but just a few of the costs that can take significant chunks out of landlords’ annual yield. Taking the necessary precautions such as carrying out full reference checks on prospective tenants, inspecting your rental property regularly, and taking out landlord insurance can help to minimise some of the risks faced by landlords.”

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