Exit of 'amateur' landlords could boost private pension pots by £28bn

Published by Hannah Nemeth on 01 August 2018.
Last updated on 01 August 2018

Lettings fee ban

With one in five (19%) amateur buy-to-let landlords planning to sell up in the next five years, as much as £28 billion could be released and added to their pension pots, according to analysis of tax and housing data.

Pensions specialist Aegon suggests that with half a million landlords planning to sell up as they see their profits squeezed by legislation, such as the 3% stamp duty surcharge on additional properties and the phased removal of mortgage interest tax relief, money will be freed up to save for retirement.

According to a report by the Council for Mortgage Lenders, one in five (22%) landlords has already failed to make a profit, prompting them to think again about their buy-to-let investment.

Steven Cameron, pensions director at Aegon, says: “Having a buy-to-let property has been seen by some investors as an alternative to saving in a pension. Investors turned to the property market in a bid to secure better returns as property values rose considerably, albeit with significant geographical variations. However, tax and regulatory changes and the prospect of rising interest rates is prompting one in five to consider selling.

“Those planning to sell should give early consideration on what to do with the proceeds. For those who planned on it to fund their retirement, the obvious choice would be to put it into a formal pension.

“With the average property price sitting at £225,000, releasing one quarter of this on sale means the individual could pay £56,250 into a personal pension ‘net’ of tax. For higher-rate taxpayers, this turns into £93,750 after claiming tax relief. While there’s a cap of £40,000 (or earnings if lower) on how much can be paid into a pension each year, those who have not used their allowance in the previous three years can ‘catch up’, meaning they can pay in up to £160,000 including tax relief.

However, Mr Cameron warns: “This is a complex area with significant sums involved and we’d always recommend seeking professional financial advice.”

Leave a comment