New rules came into force a couple of months ago that provide people over 55 with more access to their pensions. The new changes came into effect on April 6th, 2015, and if you are aged 55 or older, you can now access as much of your pension as you wish when you want it. You should always take professional and independent financial advice, but a question for many with these pension freedom reforms is whether they should access their money in order to invest in buy-to-let property.

The Attraction of Buy-to-Let

Buy-to-let properties are often popular investments because you can generate an income from rent as well as capital gains as house prices increase. The recent election of a Conservative government has also made it a more tempting proposition because Labour had considered rent controls, less tax relief and reduced tenant fees, which will now no longer come into effect.

Buy-to-let property often compares favourably with many alternative investments. Current record low interest rates have been terrible for savers, making rental properties even more attractive.

Is it Right for You?

Whether a buy-to-let investment is right for you depends on your own circumstances and the amount you have saved in your pension. One thing to be aware of is that if you take out large sums from your pension savings, you could be taxed at a higher rate.

Only 25% of your pension is tax-free after you turn 55, and the rest is taxed as income. This could put you into a higher tax category than you are used to if you take out a large amount of money to buy a property.

If you take out smaller amounts to keep you below the higher-rate threshold, you won’t have to pay the higher rate tax. However, that may not provide you with enough to buy a property or even to pay for a deposit.

So go over your finances before making any decisions, and also consider speaking to an independent financial adviser first. You may have alternative investments to consider, such as income drawdown schemes that were previously only available to wealthy savers, so always compare your options.

Be aware that being a landlord can also bring other administrative burdens such as dealing with tenants and sorting out problems. And even if that is not a problem at the moment, it could become a bigger issue in the future as you get older.

If you decide that buy-to-let could work for you, always do your sums first. Find out how much potential rental income you could get for a property compared to other investments, and start looking for buy-to-let mortgages if you cannot buy a property outright. You should also start researching areas where you could buy a property, as well as the type of property that will rent with the greatest ease.

Beware of Pension Scams

One thing to be wary of with the new pension rules is that numerous pension liberation scams have cropped up in recent years. These claim that you can access your money before 55, but they will lead to vast taxes and fees and are not worth it.

Over 55s are also being targeted by scammers who typically call up to offer a free pension review. Don’t get involved with these because they will often end up costing you money.

If you are currently considering buying or renting a residential property an independent home search consultancy could help you to source and secure the ideal property and guide you through the transaction process.

Call Richard Mottley on 0800 999 5758 or 07769 32 57 58 for further information or submit an enquiry here: