Opinion
Thinking of investing your pension in buy-to-let?
Under new pension freedoms introduced on 6 April 2015, pensioners now have much greater choice and flexibility about how to access their pension savings.
With many people over the age of 55 now able to take 25% of their pension pot as a tax-free amount (Source: Pensions Advisory Service), there has been much discussion in the media about the merits of buy-to-let investment for so-called ‘silver landlords’. Much of this discussion has centred on the potential financial returns and seeing property rental as a lucrative market.
Before rushing into any decision, the first priority should be to obtain independent financial advice and carefully explore all your pension options. Whilst buy-to-let investment might be suitable for you, there is a lot more to consider than just the financial projections. By becoming a landlord, you will be responsible for providing tenants with a home that is safe and well managed. A lot of regulation has been introduced to ensure this gets done properly.
Understanding landlord regulation
How confident do you feel learning all the rules and regulations and managing the property yourself? Perhaps at a time when you had hoped to be putting your feet up and enjoy a more relaxed pace of life. The life of a landlord is not always an easy one!
There is certainly a lot to consider: gas and electrical safety, energy performance certificates, fire safety and the housing health and safety rating system to name but a few; and if you let to three or more people who are not all related, your property becomes a House in Multiple Occupation (HMO) which must comply with the HMO Management Regulations and may need a fire risk assessment.
Each council will also have it’s own property licensing schemes. Whilst in some areas you will only need a licence to rent out certain larger HMOs, in other areas all private rented properties need to be licensed. If there is a selective licensing scheme in your area, even a house or flat occupied by a single person would need to be licensed by the council. Get if wrong and you could face prosecution and a heavy fine.
Now I’m not suggesting for one minute that you shouldn’t invest in buy-to-let, as many people do so very successfully. My only point is that you need to think it through very carefully before you jump in at the deep end.
If you don’t want the hassle of managing the property yourself, you could always consider using a managing agent. But there are so many out there, how do you decide which one?
Look out for the Safe Agent logo
This week is Safe Agent Awareness Week (1st to 5th June 2015) during which over 3,000 professional lettings agents unite to raise awareness of the importance of choosing a lettings and management agent who is part of a Client Money Protection Scheme. The scheme provides peace of mind by offering financial recompense should an agent ever misuse their clients’ money.
Agents displaying the Safe Agent logo must also have:
- professional indemnity insurance;
- defined accounting standards relating to clients money;
- a customer complaints procedure; and
- membership of an ombudsman scheme.
The Safe Agent scheme is recognised by the Government and supported by Citizens Advice, the Property Ombudsman, Ombudsman Services: Property, My Deposits, Tenancy Deposit Scheme and the Deposit Protection Service.
You can find a Safe Agent operating in your area by visiting the Safe Agent website.
