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18 Mar 2015

Pension Pots To Be Used As Buy-To-Let Deposits

A number of retirees are planning to withdraw their pension pots to help fund deposits for buy-to-let investment properties, the FT Adviser reports.

According to property website RightMove, more savers are investing in property of this kind than ever before, with figures showing that buy-to-let mortgage loan numbers were up by 23% last year. It now expects investment to increase when the new pension rules come into force this April, allowing over 55s to access their pension savings whenever they like - meaning that they may not have to take out loans.

RightMove´s director Miles Shipside points to the current “high level of interest” from new landlords, most of whom are approaching retirement and are buying with the intention to let.

“With the highest returns for the lowest investment being at the lower end of the market, the first-time buyer property sector will be the greatest recipient of any increase in demand from investors with substantial pension pots,” he explained.

However, agencies and financial advisers alike have warned that this development could cause prices at the lower end of the market to rise significantly, as investors rush to snap up properties.

Lower-priced properties are already in short supply across the country as a result of high competition between mortgage lenders, and it´s likely that they will also approach new landlords with offers of reduced rates - something that will be hard for cash-rich pension savers to resist.

This will create “further upwards price pressure in a market sector that is already out-stripping the higher-priced ones,” Shipside added.

Other agents and advisers have stated that the scale of the problem is smaller than is being portrayed, as not very many savers have enough in their pots to cover rising property costs. They also warn that cashing in pensions for property could see savers face significant tax costs, which will put many people off.

Copyright M2Bespoke 2015

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