Will your second home also be your pension?
Many clients have invested wisely in holiday homes with the potential to provide excellent returns in their retirement and supplement the more traditional pension options
Recent research suggests that the level of income people aspire to retire on each year has increased from £35,000 to £42,000 yet this would require a pension pot of more than £1 million.
Evidence shows that more and more people are turning to property investments to provide them with a suitable pension pot whether this is a buy to let investment, holiday cottage or a home in the sun. Holiday letting returns can be impressive with something of a renaissance in the English holiday cottage market and there are good returns to be generated from buy to let investments with a healthy demand for rental properties in most areas and rising rents.
The success of any property investment is to ensure good capital appreciation.
As well as any periodic investment returns, always consider it to be long term and obtain as much regulatory advice as possible on a frequent basis.
The spectre of Capital Gains Tax (CGT) is never far away and when considering property for a pension fund you must add in any taxable exposure to your calculations.
When considering investing your pension in a property you must be careful to reflect upon all of the costs involved in both purchasing and even the eventual sale of the property.
Stamp Duty, legal costs, survey fees and estate agency fees can make a big difference to the actual sum of your returns when comparing it to more traditional pension choices such as an annuity.
You should spread the risk with your investments whenever possible. Traditionally, though, property has proved dependable especially over long periods of time.
Recent changes to the way people can access their pensions from age 55 will stoke the housing market fire as many people take stock and regard property purchase as their new pensions fund.
The purchase of a second home is a little different to buy-to-let in that a weekend or holiday home is very much a lifestyle choice and often provides the opportunity to generate income simultaneously. The owner carefully selects the weeks they wish to use the accommodation and thereafter the holiday cottage agent will fill the other weeks with paying guests often generating a lucrative return.
My advice in respect of holiday homes is to invest wisely, the purchase of a park home, beach cabin or for that matter a log cabin is not the same type of investment as an unrestricted freehold seaside or country cottage.
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