You may ask yourself why you would ever want a second home, but with 37% of over 55’s planning to invest in a second property, it looks like buying an extra property might be the perfect investment for your pension freedom.
In April 2015, those 55 and over who have invested in a private pension can take the whole amount as a lump sum instead of taking 25% tax free and leaving the rest to gain interest.
This means that later in life you may have collected the funds to buy a property outright and increase your initial pension amount by renting the property out.
So, say if you had a pension that pays out £100 a week. By using that same pension you could be receiving the average rent price of £224 a week.
An extra home can open up all kinds of opportunities, increased income, a home to leave for your children or moving yourself to a quieter location during retirement. Many over 55’s that are embracing this lifestyle have said that they chose to buy another property in order to sell my house fast and downsize.
If you’re interested in getting a property to manage on the side, you can read our article- Why you should consider becoming a part-time landlord.
Statistics show that the average price over 55’s are spending on their extra property is over £250,000, however 11% are keen to expand and are considering buying more properties in future.
Experts have advised those considering this option to be wary of tax charges. Only the first 25% of your pension is tax free and so you could be facing a large tax bill if you decide to take your full pension sum. The Government’s Pension Wise service is accessible to those who have contributed a defined amount if any extra guidance is needed.
Whether you decide to buy a property with your pension to purchase a bigger home or downsize and gather a lump sum, it is definitely something to look into and be considered.
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