Buying, letting or retiring in St Albans? Why not all of the above?

Buy-To-Let-To-Retire is the new downsizing.

New research1 has identified a trend of ‘buy-to-let-to-retire’ among older people.

According to the results of the study carried out by Prudential, a leading provider of pension saving and retirement income solutions, one in five (20 per cent) over-55s are considering buying their ideal retirement property now but letting it out until they are ready to move in when they retire.

The trend of ‘buy-to-let-to-retire’ appears to be challenging the traditional route of simply selling up and downsizing as a one-off property deal on retirement. Of those over-55s who have already made a buy-to-let investment, nearly one in three (32 per cent) said they had done so to secure a property to live in one day.

Many of those looking to buy their ideal home for retirement will exploit the changes to pension regulations that came into force in April 2015. More than half (52 per cent) of over-55s looking to ‘buy-to-let-to-retire’ said they would consider using a lump sum from their pension savings to fund all or part of the purchase of their ideal retirement property.

Meanwhile, Prudential’s research also found that some older people ‘buy-to-let-to-bequeath’. Just over one in six (17 per cent) over-55s with existing buy-to-let investments said they chose to invest in bricks and mortar so they could hand down a property to a loved one in the future.

The findings also highlight the popularity of buy-to-let generally among older people in the post-pension freedoms world. Nearly three in 10 (29 per cent) over-55s surveyed said they planned to make a buy-to-let investment in the next two years. Of those over-55s planning a buy-to-let investment, seven in 10 (70 per cent) said they would be investing in the sector for the first time.

Stan Russell, a retirement expert at Prudential, said: “The advent of older people opting to buy-to-let-to retire is an interesting development, and in a post-pension freedoms world its appeal is understandable. However, there are a number of risks involved for anyone looking to take money from their pension savings, irrespective of the reasons.

“Before making decisions that could reduce retirement income in the future, not to mention increase this year’s tax bill, it is important to make the most of the advice and guidance available. The Government’s Pension Wise service provides free and impartial guidance on accessing pension savings, while a professional financial adviser can help retirees navigate the pros and cons of using pension savings for property investment.

“The simplest approach for most people looking to give themselves choices and secure their ideal home when they retire is to save as much as possible into a pension as early as possible in their working life.”