Landlords and Pension Planning

When the new pension freedoms were introduced a few years ago it was arguably a positive move in helping individuals to plan their retirement in a more flexible way.

In particular those with company pensions who no longer had to wait until the official company retirement age to draw their pension, which could well be 60 or later, now had the option to choose another route which would allow them to start benefitting from their pension savings at 55 years of age.

However, even at that earlier age, for many that may still feel a little inflexible and an increasing number have been looking at other options to prepare for retirement, not least becoming a landlord.

Recent figures from a survey commissioned by the Department for Levelling Up, Housing and Communities found that the majority of the UK’s landlords choose to invest in UK property with the intention of it forming part of their pension pot.

In fact, more than half (54%) see their properties as a long-term investment to contribute to their pension.

When looking specifically at buy-to-let landlords who invest in UK property, this rises to 58% who intend to keep their property or properties until retirement age.  There’s no doubt that brick and mortar in the UK has performed well as an asset class across almost every area of the UK in recent years, even through difficult economic periods such as Covid.

Ongoing price rises, even during slower times, have made it a popular asset class among investors who are looking to benefit from capital gains later in life – this was also alongside the money earned through rental income if an owner decides to invest in property in order to let it out to tenants or as a short term holiday let.

For some, flipping properties – buying at a discount, possibly to refurbish and resell shortly afterwards – can often turn a profit but of course, carries a higher risk. In addition, it doesn’t benefit from the natural capital appreciation that takes place over time.

Certainly, those who invest in UK property for a long-term investment often see the greatest gains over time but potential landlords also need to be aware of additional costs involved in buying and selling, such as stamp duty and legal fees, all of which can cut into any profit.

Adrian Sangster, Leasing Director, Aberdein Considine said: “Buying property as a means to help support your pension planning definitely has much in its favour but as with all investments, especially if it’s in respect of retirement planning, getting the right independent financial advice is absolutely vital.

Becoming a landlord is not a decision to be taken lightly and again getting the right advice is crucial and can save you time, money and a great deal of stress.”

If you're looking for advice on investing or retirement planning, contact our team for the latest news and advice.