Quote Ref: WS1

Should You Be Buying a Second Home?

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You may ask yourself why you would ever want a second home, but with 37% of over 55’s planning to invest in a second property, it looks like buying an extra property might be the perfect investment for your pension freedom.

In April 2015, those 55 and over who have invested in a private pension can take the whole amount as a lump sum instead of taking 25% tax free and leaving the rest to gain interest.

This means that later in life you may have collected the funds to buy a property outright and increase your initial pension amount by renting the property out.

So, say if you had a pension that pays out £100 a week. By using that same pension you could be receiving the average rent price of £224 a week.

An extra home can open up all kinds of opportunities, increased income, a home to leave for your children or moving yourself to a quieter location during retirement. Many over 55’s that are embracing this lifestyle have said that they chose to buy another property in order to downsize.

 If you’re interested in getting a property to manage on the side, you can read our article- Why you should consider becoming a part-time landlord.

Statistics show that the average price over 55’s are spending on their extra property is over £250,000, however 11% are keen to expand and are considering buying more properties in future.

Experts have advised those considering this option to be wary of tax charges. Only the first 25% of your pension is tax free and so you could be facing a large tax bill if you decide to take your full pension sum. The Government’s Pension Wise service is accessible to those who have contributed a defined amount if any extra guidance is needed.

Whether you decide to buy a property with your pension to purchase a bigger home or downsize and gather a lump sum, it is definitely something to look into and be considered.

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