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Buy to let still ‘hugely popular’ with retirees despite looming rule changes

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A raft of painful rule changes has done little to dampen retirees’ enthusiasm for buy to let investing, research has found.  

From 1 April 2016, any buy-to-let investor will have to pay an additional 3% stamp duty surcharge compared with residential buyers while higher-rate tax relief on mortgage interest will reduce from April 2017 to the basic 20% rate and landlords will be able to claim less for wear and tear on their properties.

But despite the impending changes, the number of retirees looking to invest their tax free cash lump sum from their pension pot into a buy-to-let property has remained constant this year.

According to Fidelity International, 7% of its retirement customer base invested their cash lump sum in a rental in January, the same proportion recorded in the last six months of 2015.

Overall, property purchases remain hugely popular with retirees – accounting for 14% of all usages of tax free pension cash in 2015 and placing it firmly among the top three options after reinvesting and topping up income.

Maike Currie, investment director for personal investing at Fidelity International, said: “The British love affair with all things property is well-documented and, for many retirees, buy-to-let is seen as a ‘no brainer’ investment given the spectacular rise in property markets, particularly in London, over recent years.”

However, she added extra costs associated with investing in bricks and mortar can negatively impact returns.

“The illiquidity of the housing market as well as costs in the way of maintenance, stamp duty, mortgage arrangement fees and a host of unpredictable outgoings can chip away at income. Not to mention the time and effort required to manage a property and the risk that it may lie empty between tenancies.”

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