LV has called on the government to scrap stamp duty costs for pensioners seeking to downsize their homes in retirement.
Research from the provider suggested a third of people approaching retirement will be ‘property pensioners’, relying on money tied up in their home to pay for their lifestyles in retirement. This compares to the 22 per cent of existing retirees who have done the same.
The provider asked 1,500 UK over 50s during March, 1,200 of whom own their own home.
Downsizing is the most popular way to raise money from a property, but the average house price triggers a £4,600 stamp duty bill, according to figures from LV.
The current stamp duty land tax threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
Stamp duty is triggered when a freehold property is purchased, a new or existing leasehold is bought, someone buys a property through a shared ownership scheme, or when someone is transferred land or property in exchange for payment, eg you take on a mortgage or buy a share in a house.
In a statement, LV said it is unfair pensioners are being indirectly penalised for accessing the money in their home to help provide an income. Just over 40 per cent of those nearing retirement told the provider they would be more likely to downsize if a tax cut were introduced.
LV suggested the reform could also help millions of younger homebuyers find a family home by allowing ‘empty nesters’ to move and increasing the supply of larger homes.
Findings from the provider’s research suggested three-quarters of pensioners live alone or as a couple, yet two-thirds live in properties with at least three bedrooms, so may have far more space than they need.
John Perks, managing director of LV Retirement Solutions, said: “We’re calling for government to scrap the unfairly high stamp duty costs for downsizing pensioners and provide a much-needed injection of larger homes into the market for the millions of families struggling to move up the ladder.
“By increasing the number of property sales, this could also increase government’s stamp duty revenues in the long run, making it a win-win for everyone.”
Stamp duty rates:
| Up to £125,000 | Zero |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
peter.walker@ft.com
