Is Property Good for Retirement?
Yes, we believe with the right strategy it’s certainly possible to retire through Buy-to-Let property investment. Depending on a number of factors such as:
- The size of your portfolio
- Gross rental income
- Level of retirement lifestyle
Before making any investment, you need to explore the different strategies and tactics on how you can create a comfortable retirement or even early retirement through Buy-to-Let property investment.
Investing for retirement – A real story
We asked expert property investor Andy Foote and Director at SevenCapital about his journey in property investment including his initial influence, the obstacles he has overcome and the tips he would give to any property investor.
Learn directly from a real-life success story for how to pave the way for a successful retirement through property.
Is Now a Good Time to Invest in UK Property?
Regional cities continue to dominate growth, using the momentum of redevelopment and housing undersupply to push prices further upwards. Borrowing costs remain at a record low and a relatively stable labour market is also helping to combat the impact of uncertainty.
With many forecasts also pointing at marginal rises within the London market, the so-called ‘Boris Bounce’ could mean light at the end of the tunnel for the capital, which finally seems to be recovering from its biggest decline since 2009.
Another major question is, does this increase represent a short-term positive bounce or the beginning of a new property cycle? And what does this mean in terms of the overall UK property market forecast for 2020?
Frequently asked questions with retirement, pensions and property
Can I get a Buy-to-Let Mortgage when I’m retired?
As BTL mortgage payments are usually covered by the rental income rather than a work income or pension it is possible to get a mortgage in retirement. Lenders will certainly vary. For example, will not allow a mortgage to run past 70. A 60-year old, however, could still take out a 10-year mortgage and clear the debt by selling the property.
Can I use my pension to buy property?
Withdrawing from a pension to pay for a Buy-to-Let property is an idea on the rise with data showing that nearly £2.4 billion has been cashed out by savers.
A poll by YouGov discovered that 30% of respondents aged between 45 and 54 said they were considering accessing retirement funds to purchase a Buy-to-Let property.
Since pension freedoms were introduced in 2015 – people have been able to access their cash from a defined contribution (DC) pension from the age of 55 without the need to buy an annuity. The first 25% of the savings pot can be taken tax-free. This has opened up the potential for more people to make their own decisions with their retirement savings.
While there are plenty of arguments for and against using pension funds to purchase property, the most important thing to do first is consulting a professional, particularly around lump sum taxation that could occur as a consequence of withdrawing.
What is the average retirement income in the UK?
According to Government statistics, the average UK pensioner earns around £304 per week after taxes, housing costs and contributions, vastly different to 1994 when the average pensioner earned £161 per week.
Last year, benefit income was the largest component of total gross income for both pensioner couples and single pensioners – 59% for individuals and 35% for couples.
According to new guidelines by the Pensions Lifetime Savings Association (PLSA), based on research by Loughborough University, there are average target thresholds for establishing a certain standard of living. The PLSA believe these thresholds are:
Minimum: Individual needs an annual income of £10,200. A couple needs £15,700.
Moderate: Individual needs an annual income of £20,200. A couple needs £30,000.
Comfortable: Individual needs an annual income of £33,000. A couple needs £47,500.
According to Sanlam, a wealth management company, the average income people feel they need in retirement to achieve their goals is £34,000 a year. Over a standard 15-year retirement, this would amount to £510,000 in pension savings.
In reality, using the average UK retirement income mentioned above, the average pensioner is relying on £14,592 a year – £218,880 in total pension savings over a 15-year retirement period.