Section 24 could cause the next pension crisis

11:10 AM, 20th July 2017, About 8 years ago 14

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The impact of recent changes to the way buy-to-let properties are taxed could create the next pension crisis as individuals are becoming over-reliant on property to fund their retirement years, says the leading landlord body in the UK.

77% of landlords, approximately 1.8 million, say they are reliant on their residential property investment for their retirement and findings from the Mintel consumer market research report show that Buy to Let continues to be viewed as a safe way to save for later life, with 68% saying it represents a good way to plan for retirement.

However, figures from the Office for National Statistics (ONS) estimate the average retired household spends £21,770 every year, which leaves 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 shortfall per year would require savings in the region of £300,000, which is why the National Landlords Association (NLA) says so many people have turned to property to provide for later life.

Richard Lambert, CEO 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 27% 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”.

The NLA is calling on the Government to help those affected adjust their financial plans by tapering the amount of capital gains tax (CGT) landlords will need to pay when they come to selling their property, based on how long they have owned and let it out for.

Lambert added “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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Comments

Neil Patterson

11:15 AM, 20th July 2017, About 8 years ago

Interesting figures showing why the government are cutting off their nose to spite their face with retrospective mortgage interest relief reductions.

It is much more efficient economically to have financially independent pensioners.

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Dr Rosalind Beck

13:20 PM, 21st July 2017, About 8 years ago

But will the Government care if many landlord pensioners are living in poverty? (well done on the new site BTW, Neil!)

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Alison King

15:36 PM, 21st July 2017, About 8 years ago

I don't really understand this. Pensioners who are using property to make their income up to £21k or so are not going to be affected by S24. Am I missing something?

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Jim Parker

7:51 AM, 22nd July 2017, About 8 years ago

Reply to the comment left by "Alison King" at "21/07/2017 - 15:36":

You can still be a higher rate tax payer and earn absolutely nothing by 2020 when the full impact of S24 hits. Even if I earn zero I face a tax bill of £6,000 as I have £70,000 in mortgage interest to offset each year. So I have to earn £70,000 before the interest just to pay it making me an automatic higher rate tax payer. I'm not the only one after lobbying the government it's apparent that this is ticking time bomb.

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Tobias Nightingale

9:08 AM, 22nd July 2017, About 8 years ago

I may be clutching at straws here but it may just may be worth someone contacting Melanie Onn whom is a housing minister as she may have sympathy for section 24 victims if put across eloquently (like Ros always does). I say this because I came across which she said in march this year:

Melanie Onn Labour, Great Grimsby
What does the Minister say to the private landlord who came to see me with his tenant with concerns about future eviction rates if there is no option under universal credit for rent to be paid directly to landlords?

Might be wrong just thought I would put it out there.

P.S Not strictly related but did not want to clutter of the site with something that isnt really worthy of a post.

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paul smith

10:06 AM, 22nd July 2017, About 8 years ago

Reply to the comment left by "Tobias Nightingale" at "22/07/2017 - 09:08":

Melanie Onn is not a Housing Minister. She is a SHADOW Housing Minister. Despite the hullabaloo, Labour LOST the election, and Labour are not in power.

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philip allen

10:53 AM, 22nd July 2017, About 8 years ago

Is it me? I don't like this new layout and half words that are finished on the next line. What was wrong with the old layout? If it aint broke...................

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Tobias Nightingale

11:28 AM, 22nd July 2017, About 8 years ago

I meant to say Shadow housing minster. Given at least 30 tory seats barely held on I would wager labour has as good as won next election. And besides for the sake of argument if and I know thats a if but if she was won over by the argument against clause 24 with some tory MP's whom already are trying to overturn might mean it gets reversed before the damage starts or at least not to its fullest extent.

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H B

12:34 PM, 22nd July 2017, About 8 years ago

Reply to the comment left by "philip allen" at "22/07/2017 - 10:53":

I think it looks good.

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Annie Landlord

15:16 PM, 22nd July 2017, About 8 years ago

Reply to the comment left by "Tobias Nightingale" at "22/07/2017 - 11:28":

I don't think Labour has all but won the next election at all. I sincerely hope not because Corbyn is very, very very anti private landlords. One of his off the wall ideas is forcing PRS landlords to sell houses to their tenants at the same discount that SRS tenants get. He is also committed to rent controls. He doesn't actually support housing being in private ownership.

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