Pension regulation changes mean 1/3 of retirement savers consider investing in buy-to-let property

Pension regulation changes mean 1/3 of retirement savers consider investing in buy-to-let

Direct Line for Business research discovers that a third of people aged 45 – 64 with a pension would consider using some or all of their pension pot to fund the purchase of a buy-to-let property.

  • Income (43 per cent), investment security (23 per cent) and capital appreciation (17 per cent) most frequent reasons for investing
  • 12 per cent of potential buy-to-let investors favour the investment because they would like leave it as an inheritance for their children
  • Those approaching retirement anticipate an average yield of 13 per cent on their buy-to-let investment

New analysis by Direct Line for Business (DL4B), the small business insurer, reveals that a third (32 per cent) of people aged 45 – 64 with a pension would consider using some or all of their pension pot to fund the purchase of a buy-to-let property as an alternative to a traditional pension income funded by an annuity.

DL4B’s research has highlighted that the number of ‘silver landlords’ could increase significantly given the changes in pension regulation which mean that from April 2015, people approaching retirement and pensioners will be able to access as much or as little as they want from their pension pots.

Property Lettings Expert, Kate Faulkner said: “Buy-to-let is becoming an attractive option for people, especially while property and rents rise. It can deliver some great returns over 15-20 years. Given the recent pension freedom announcement, for some it could be good to diversify their investments when approaching retirement, but landlords need to seek financial/expert advice and ensure they understand the returns that property can deliver and especially the tax implications.”

As property and rental prices continue to rise, buy-to-let can provide a regular income flow while also offering the opportunity for capital appreciation. The research shows that the main reasons for considering this investment given by potential ‘silver landlords’ was that it produces regular income (cited by 43 per cent of people), the perceived security of the investments (23 per cent), and expected capital appreciation (17 per cent). One in ten (9 per cent) potential buy-to-let investors favour the investment because they would like to invest in something that will allow them to leave an inheritance to their children.

The research highlighted the perceived high returns available for landlords as those approaching retirement anticipate an average (median) yield of between 10 per cent and 14 per cent on their investment.

Main reasons for considering the purchase of buy-to-let property (of those aged over 45)

Regular income

43%

It is one of the most secure/safe investments

23%

Capital appreciation

17%

I want to invest in something that will allow me to leave an inheritance to my children

9%

Don’t want an annuity

6%

Source: Direct Line for Business

Jazz Gakhal, Director at Direct Line for Business explained: “Buy-to-let can be a flexible investment, providing an immediate source of income as well as being a long term asset. As such, it is understandable that people approaching retirement age are considering investing their pension pots in property. However, prospective landlords should understand that buy-to-let does not come without financial risk.

“Legal expenses for repossessions and potential damage to property are but just a few of the costs that can take significant chunks out of landlords’ annual yield. Taking the necessary precautions such as carrying out full reference checks on prospective tenants, inspecting your rental property regularly, and taking out landlord insurance can help to minimise some of the risks faced by landlords.”

To help ‘silver landlords’ keep track of charges paid, ongoing expenses and to assist in calculating the yield on their portfolio, Direct Line for Business (DL4B) offers a landlord app, Mobile Landlord.  The app enables landlords to manage up to five properties on the go through a single online, mobile portal.  Mobile Landlord is free to download and available on both iOS and Android.

For more information on DL4B landlord insurance, please visit the website: http://www.directlineforbusiness.co.uk/landlord-insurance/

Or visit the Landlord Knowledge Centre for useful tips and guidance:

http://www.directlineforbusiness.co.uk/landlord-insurance/knowledge-centre

Notes to editors

1Research conducted by Consumer Intelligence among a representative sample of 829 UK adults with a pension aged between 45-64 between 12th September and 6th October 2014

Citigate Dewe Rogerson
Amrit Nijjer
Tel: 020 7282 2803
Email: amrit.nijjer@citigatedr.co.uk

Direct Line Group
Simon Henrick
Head of News and Issues
Tel: 0208 313 5965
Mobile: 07833 166 717
Email: simon.henrick@directlinegroup.co.uk

Direct Line for Business

Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone or online.

Direct Line for Business insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line for Business products or get a quote by calling 0345 301 4827 or visiting www.directlineforbusiness.co.uk

Landlord Insurance Press Release

Added: 2nd January 2015