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Could buy to let tax changes lead to the 'next pension crisis'

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The leading landlord body in the UK, the National Landlords Association (NLA), is calling on the Government to help retired and landlords close to retirement adjust their financial plans to combat fears of the next pension crisis as individuals are becoming over-reliant on property to fund their retirement years.

The NLA is asking the Government to taper the amount of capital gains tax (CGT) landlords will have to pay when they eventually sell their property, based on how long they have owned and let it out for.

Research shows that:

  • 77% of UK landlords – approximately 1.8 million individuals – say they are reliant on their residential property investment for their retirement;
  • 68% of people view investing in property as representing a good way to plan for retirement.

The NLA reports, however, that Office for National Statistics figures estimate that the average retired household spends £21,770 annually, leaving a shortfall of more than £15,000 after taking the full basic state pension of £6,359.60 into account.

In order to make up a £15,000 annual deficit, adds the NLA, requires savings in the region of £300,000, which is so many people have turned to property to provide for later life.

 A spokesman at the NLA said: “As a consequence of government policy over recent decades almost two million people are reliant on their property to fund their later years, but the changing tax regime will substantially reduce the income they receive from these investments and so compromise the retirement plans of a significant number of hard-working people.

“Around a quarter of UK landlords are already retired, and 37% are aged 55 or over, so there is a pressing need to tackle these issues without delay”.

 “Landlords who have invested in residential property for the long term are different from short-term speculators who buy and develop properties, and this should be recognised when it comes to how much capital gains tax they pay when they decide to sell.

“It is not always in the best interests for landlords to continue to manage residential property into later life. A capital gains relief like we propose would provide an incentive to sell, allowing people to sell poorly performing properties and potentially purchase an annuity or invest in more liquid, lower risk assets to fund their retirement instead”.

 

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