Should I invest my pension lump sum in another buy to let?

Hi Andy,

On the plus side you are a cash buyer, so no Section 24 penalty and you might be able to get a better deal on the Purchase Price. Therefore, you are in a much better position than a landlord with a highly geared mortgage and a high rate tax payer in their sole name.

There is now a 3% surcharge in SDLT on your investment however, and it also depends on your attitude to risk as house prices can go down as well as up, voids, maintenance etc.

So it comes down to how confident you are in making the right investment which readers might be able to help you with if you have some examples already.

You should also seek advice from a fully qualified and insured IFA, but they are unlikely to offer specific advice regarding investing in property.

If I were retiring, I would want a buy to let investment that I could let out and forget about for most of the year, So I would not go down the HMO ( House of multiple occupancy) route. I would consider a new build, as they are modern and desirable to tenants, and almost hands off as the gas central heating, boiler and white goods are brand new. Although you will be paying over the odds and your will have to be careful about the ground rent potentially doubling every 5 years or at least increasing by the RPI (retail price index) which was quoted to me as 4.95% on a mobile phone contract that recently increased this year. Plus the monthly service charge will eat into the monthly rent too. Britain’s leasehold industry is broken and needs a massive overhaul as their are some scandalous stories of buyers not being able to sell on. So I would probably look for a 2/3 bedroom freehold house, terrace, semi or detached for a small family to call home, with a small garden, which would only require landlords building insurance and the other regulatory checks, Like the annual gas Saftey certificate etc. I would look for one already liveable, so I could market it straight away, albeit I would be prepared to fully redecorate ( paint it white) and put down new durable flooring (laminated or commercial carpet) Any other minor works could be done as they crop up, whilst the tenants are in situ. ( I would probably pay a professional to paint it in 3 days if I didn’t or couldn’t do it myself). I would also hold back some of the lump sum as a cash reserve. Encase the boiler or roof needed fixing. I would use a well known local estate/Lettings agent who is registered with all the approved bodies for a tenant finding fee only, and then self manage. Water leaks, plumber, electrical fault, electrician , boiler/ heating or hot water problems, gas engineer or call British Gas one off repairs service or even buy a 12 month boiler contract that covers all the above for approximately £25 per month. Also a good handyman is essential. Lastly, depending on who your leaving your inheritance too, I would also consider a equity release also known as a lifetime mortgage on my main residence, especially if it’s your forever home, if not I would downsize first to release any equity in your current property to subsidise your retirement income, park some in a 1 year fixed rate account and some in a accessible cash isa and withdraw a monthly income from the capital, when I’ve spent that I would then use an equity release product and make sure I used a flexible drawn down approach to keep the Intrest rolled up to a minimum, no point in releasing 50k if you only need 6k or 12k a year to supplement your income. That’s what I would consider, obviously the above is not in any way advice, but remember not one of us can take anything with us, once our time is up so may as well spend it and enjoy it while we can. Good luck...

Hi Andy, naturally you are going to be cautious about continuing to invest in property after your previous bad experiences. Neil’s advice to seek the views of an independent financial adviser is very sound and they will be able to give you options for your hard earned tax free cash, including no doubt, spreading the risks from putting all your eggs in one basket of investments.

The very fact that you ask the questions means you need to get experienced help and advice on this as there are too many factors to take into account.
Ideally, use a financial planner who will charge you a fee.
You need to consider all of these factors and probably more.
What is your income requirement now and in the future
What are your assets worth?
What income can they produce if any?
What are your long-term cash flow assumptions for inflation and growth on your assets
What is your attitude to investment risk
Should you use full drawdown, an annuity or deferred annuity
What is the income potential and cost of the property return against the pension
You could make more on the property but as you know you could lose more too - what is your capacity for loss.
Do you even have an IHT problem or are you likely to have one?

Get experienced advice before deciding. Making errors at this stage of your life could have serious consequenses.

I have a completely different take on this. If you want a secure income which will let you sleep at night and is paid quarterly, then look at investing in a high quality investment trust. City of London investment trust is on a yield of 4% and has increased its dividend every year for the last 50 years. The dividend this year looks like increasing by about 6% so we are now looking at around a 4.2% yield. You and your wife can each put £20,000 into a self-select share ISA. A £40,000 total investment will give you an initial income of £1,680 per annum paid quarterly. This income will be completely tax-free. This will at least match the after-tax income of a buy-to-let and no tax return is needed. You should also get long term capital growth of your investment with no capital gains tax to pay if you realise part or all of your investment.

Judging by your past track record in property, I'd leave it alone.
Ha ha oops. I'm by the pool in Gran Canaria in me sense of humour mood, so excuse me.

With the increasing regulation they chucking at Landlords, and high current prices and your retiring age, I'd stay clear. And look at what other guy says. Invest in some index trust trackers. Safe ones if u need money every year.
Or FTSE 250 tracker if u a risky man and can leave it 5 years.

Oh and buy a 12 month landlords rent guarantee insurance policy, this way your retirement income will be paid either buy the tenants or the insurance company, whilst they evict them, all you need to do is arrange a locksmith on the day the bailiffs come calling. Reminder it’s not personal when a tenant does not pay their rent , it’s business as usual. You won’t lose no sleep with a rent guarantee policy, knowing your money is coming in every month regardless of who’s paying it. I’ve had two rough tenants in 15 years that’s out of about 20 tenants and both times I was insured. & they all passed tenancy references Phew! One used identification from a real person being deported and the second had a nervous breakdown ....

Paul Green has laid out the long list of risk and things you have to do. For 4% return?

I agree with the Silver Surfer- buy an investment product. In fact-the best possible one is exactly where your money is right now- in your pension. This accumulates with no capital gains tax. If you need income supplement, just draw down what it earns - its pretty certain it will exceed 4%.

That way, you avoid capital gains tax, do no work, do no tax returns, avoid possible expensive mistakes that landlords have to face, maintain your capital which continues to grow tax free and have access to your cash as short notice penalty free, cost free , forever.

No brainer!

I agree with Paul, Mick and silversurfer. Also factor in the possibility of a Corbyn government!

Avoid. You don’t want this type of worry in your retirement. You already have one. Buy some high yielding investment trusts and sit back and enjoy the cash flow.