Around 53 per cent of retirement savers say they would consider investing or are already investing in buy-to-let to increase their income in retirement, according to research from specialist mortgage lender Kensington.
The firm commissioned Consumer Intelligence to survey a nationally representative sample of 915 retirement savers aged over 40 at the end of March, finding that 8 per cent are already investing in buy-to-let while another 45 per cent said they would consider it.
This follows suggestions that the new pension freedoms will spark a buy-to-let boom. FTAdviser reported in February that advisers and estate agents had acknowledged this could be the case, however many claim the scale of the likely investment is being overblown as not many people have a large enough pension pot.
The Council of Mortgage Lenders also recently pointed out that the potential trend of buy-to-let landlords is likely to be overstated, as the majority of pension pots are likely to be too small to make significant property investment, while many may be put off by the risks involved.
Kensington’s research also showed that 21 per cent regret or are unsure about saving into pensions to fund retirement, despite last week’s launch of the pension freedoms.
Of course this meant that 78 per cent of savers were happy they have took out pensions, but the study also found 15 per cent of respondents regretted their pension investments and 6 per cent were unsure.
Steve Griffiths, head of sales and distribution at Kensington, cautioned: “With so many people unhappy with pension saving there is a need for alternative approaches, but buy-to-let will not be right for everyone and anyone planning to do so needs to get advice from a broker as well as advice on other issues including tax.”
He cited CML’s data to make the point that buy-to-let is already a strong and growing sector, with more than 1.63m mortgages worth around £188bn representing around 14 per cent of the total mortgage market.
Last week, index provider MSCI became the latest to suggest property investment could be a leading trend from the at-retirement reforms, with the firm’s vice president and head of alternatives Mark Weedon pointing out that unlike other investments, both London and UK residential property has an “almost flawless track record” of holding value and rising in value over the long term.
However, there have also been warnings of the risks inherent in property investment, with Prudential’s head of business development for retirement income Vince Smith-Hughes stating that people need to think about their circumstances.
“Taking their money out of a tax-efficient wrapper, their pension, and putting it into an investment which will not be so tax efficient, is something that might not be appropriate for everyone”, he added.
peter.walker@ft.com
