Landlord Reliance on Investment Property Could Lead to Pension Crisis

The reliance of landlords on their investment properties as retirement funding could lead to a future pension crisis, claims the National Landlords Association.

77 per cent of landlords, equating to approximately 1.8 million individuals in the UK, claim to be reliant on their investment property to fund their retirement years. The findings, which come from the Mintel consumer market research report, reveal that buy to let is often increasingly considered a safe method through which to save for later life. Nearly 68 per cent of those surveyed are of the opinion that buy to let represents a good way to plan for retirement.

Figures from the Office for National Statistics (ONS) recently discovered a significant discrepancy between the outgoings of the average retired household and the basic full state pension, an issue which leads to many retirees turning to methods such as investment property in order to bolster their income.

However, Richard Lambert, CEO at the NLA has stated that recent tax changes could limit the impact of buy to let investments on landlord finances: ‘As a consequence of government policy over recent decades almost two million people are reliant on their property to fund their later years, but the changing tax regime will substantially reduce the income they receive from these investments and so compromise the retirement plans of a significant number of hard-working people. Around a quarter) of UK landlords are already retired, and 37 per cent are aged 55 or over, so there is a pressing need to tackle these issues without delay.’

The NLA has called upon the current Government to help landlords adjust their financial plans by tapering the amount of capital gains tax (CGT) those affected will need to pay when they sell their property, based on how long they have owned and let it out for.

Lambert continued: Landlords who have invested in residential property for the long term are different from short-term speculators who buy and develop properties, and this should be recognised when it comes to how much capital gains tax they pay when they decide to sell. It is not always in the best interests for landlords to continue to manage residential property into later life. A capital gains relief like we propose would provide an incentive to sell, allowing people to sell poorly performing properties and potentially purchase an annuity or invest in more liquid, lower risk assets to fund their retirement instead.’

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