‘Pension Freedom’ Paves the Way for Mature Buy-to-Let Landlords

From April 6th, pension reforms will grant the UK population aged 55 and over the freedom to reinvest lump sums of their pension pots in to property, and join the expansive community of buy-to-let landlords.

The reforms will enable savers in their mid-50s to access all or some of their pension pot, with a 25% tax-free drawdown, granting them greater flexibility to invest their money for retirement. This has prompted Mark Haywood of the National Association of Estate Agents to predict: ‘There are no doubts we will see a feeding frenzy, with many of those with large pension pots cashing in their lump sum and putting it straight into property.’

In a saturated climate of tenant demand, the appeal of buy-to-let investments has increased, due to the prospect of a steady monthly income in conjunction with the potential for long-term capital growth. Therefore property could offer pensioners additional returns to supplement any other existing investment options or savings.

With average buy-to-let lenders demanding a 25% deposit from buyers, some pensioners may be priced out of securing a suitable second investment property outright. This was reflected by David Hollingworth of mortgage broker London & Country, who stated; ‘Most buy-to-let lenders require buyers to put down at least a 25% deposit.’

However pensioners can utilise their savings to put towards a sizeable deposit whilst securing the rest through specialist buy-to-let mortgage deals.

Similarly to the residential mortgage market, buyers who place a larger deposit up front have access to more competitive mortgage deals. For example, if you have a 40% deposit at your disposal, Virgin Money offers a five year fixed rate at 3.19% with a one-off £2,094 fee.

Prior to these changes to pensions, pensioners found it difficult to secure a mortgage. However, with improved flexibility of spending, buy-to-let mortgage providers now impose fewer age-related restrictions. One of the most appealing qualities of a buy-to-let mortgage is that buyers are only required to pay the interest on the money borrowed. Therefore this can be particularly advantageous to pensioners who have very controlled monthly budgets.

The capital growth generated by buy-to-let investment options can serve as a lucrative method to boost your existing pension pot. With a wave of over 55s forecast to seek property as a means to supplement their savings and achieve a regular income, the need for transparency and diligent service is essential.

Our recent research report – Estate Agent Evaluations – discovered that a large proportion (27%) of over 65s in the UK have had a negative experience with an estate agent. It is of great importance to offer personable and attentive service to all generations of property seekers and to cater for their individual requirements accordingly. Selecting an investment option with regard to one’s retirement is one of the most significant decisions an individual can make. At Strawberry Star, we stand to support this process with the most reliable and accurate information available.

To find out more about buy-to-let options, speak to a member of our team on: