Pension pot property?

by Readers Question

13:33 PM, 13th January 2020
About a month ago

Pension pot property?

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Pension pot property?

Early pension pot potential? It is by no means a fortune, but I can access £50,000 of my pension fund tax free now I am 55 and I intend to retire when I am 60.

I am contemplating buying a one bed apartment in Spain for rental and to use myself out of season.

Has anyone with experience able to give an opinion or any advice as to whether the money is better left where it is or invested in Spain?

All advice is welcome folks 🙂

Andy



Comments

david porter

6:38 AM, 14th January 2020
About a month ago

Sometimes in property investing things go wrong. You need to be able to resolve issues and visit the property. We do not have any property that we cannot get to within 2 hours and most are 20 minutes.

Ken

8:16 AM, 14th January 2020
About a month ago

I think your idea of investing in property is a great one, but I would beware of Spain. I have a couple of friends who are involved in legal battles to get issues resolved when the properties were 'reclaimed' not by lenders (they had no mortgages) but by the authorities. Also, sorry to say Brexit, but we do not know what the rules or access will be like afterwards so be careful. Good luck with whatever you do though

Sue Bird

8:40 AM, 14th January 2020
About a month ago

I would be careful on holiday lets. I checked the possibility of buying holiday let or even buy-to-let property in Spain and concluded investing in the UK was better. The absolute letting income figures look good, but factoring in all costs (insurance, local taxes, income tax, maintenance and repairs, full set of furniture, garden and swimming pool upkeep, utilities, cleaning and laundry after every let) make quite a difference.

Laura Delow

9:02 AM, 14th January 2020
About a month ago

I don't know what type of pension you have e.g. defined benefit or defined contribution nor do I know your personal or tax circumstances today & what these are anticipated to be in 5 years when aged 60, but suffice to say there is no black & white answer as to whether it's a wise decision to take £50,000 out of your pension to buy a place in Spain for your personal use & let out inbetween times, as you're comparing apples with pears in terms of investment comparison. I'm also not sure whether you mean you're taking the tax free cash from your pension or the whole pension pot. Nor do we know what your tax bracket is & what income you'll need in 5 years time or whether there'll be any debt or borrowing you might be better off redeeming first e.g. credit card balances, loans or mortgages. Another factor to put in the melting pot is you do need to declare any rental income you receive on property in Spain to the Spanish tax authorities & if let via an agent, they deduct tax at source but if no agent don't think you can go under the radar as the tax authorities are always searching websites for private rentals to find those who are not declaring rental income. In my opinion if buying abroad, unless skilled & knowledgeable in this field, you should treat this as your 2nd home which may or may not make you money & not treat it as an investment as there are too many factors out of your control; purchase costs are pretty high in Spain, tax on rental income, costs to let/manage, damages, check-in/out of holiday makers, laundry & cleaning service, service charge costs, utility bills can run high as there's little competition in Spain so costs are high & holiday renters have a habit of running up high bills, but council tax bills are low. As a non resident you'll also need to pay a property tax once a year based on the rateable value. If a new build be doubly sure it has a habitation licence, the cost of agent fees if to be used. The only similarity between Spain & the UK when buying property is location effects values but other than that over the longer term capital growth in Spain is not like it is in the UK i.e. tends to be flat as few Spanish move home & if on one of the Costa's for example then growth can be effected by holiday maker demand due to competition & the exchange rate & number of new builds going up nearby that dampen the value of 2nd hand stock. If bringing the rental income back to the UK to live on, at present your euros will get you more pounds than when the exchange rate was 1.3 euros to the pound just before the Referendum. If sending money out to Spain to cover running & fixed costs, you're currently getting a bad exchange rate. The list goes on.
Your pension on the other hand if a money purchase scheme may be getting some good growth tax free. Ontop of this are many other factors you should consider before raping a pension pot which your financial adviser should be able to advise you on.

Boru

13:24 PM, 14th January 2020
About a month ago

Just sold a property in Spain and delighted to have done it. There is huge supply of holiday property in spain and people looking for people to look after properties out of season...you will be spoilt for choice re using a property there for very little or no money off season.
Owning in Spain comes with lots of bills to council, community fees, banks, govt and you have to compete hard in most cases... also Booking.com etc fees and maintenance cleaning...Brexit may bring unexpected 'drlights' also...
I would advise against for what its worth and use the cash to invest in something else
Hope this helps

Claire Bartley

17:46 PM, 14th January 2020
About a month ago

Hi I've recently pooled my pension with several other people and together we are using our funds to purchase property. It's a great source of money and we've been able to use the pot in several different ways - feel free to get in touch if you'd like to know more.
I personally would be cautious about investing elsewhere in the world - only because I'm a bit of a control freak and don't understand the economy, planning, building regs, compliance, access to traders etc as well as I do in the UK. Best of luck though.

user_ 8640

18:49 PM, 14th January 2020
About a month ago

Obfuscated Data

Alison King

16:27 PM, 18th January 2020
About a month ago

I used the tax free part of my pension as a deposit to invest in property several years ago and I don't regret it as I wanted to diversify. The only thing is that it then meant I couldn't increase my payments into my pension for two years as it might have been argued that I was "recycling". This was quite limiting as I really needed to save up for retirement. My properties are in the UK. I've looked into investing in Spain as I'd like to live there one day but the initial costs and taxes are quite high and may well be higher after Brexit, as it currently is for non-EU citizens.

Phil Ireland

10:07 AM, 19th January 2020
About a month ago

In reality, the rental season in Spain can be quite short at possibly June-Sept, and so you will have all the running costs for little income for 8 months of the year. However, if your looking at this as somewhere to go and enjoy the culture, weather, lifestyle etc rather than an investment then definitely go for it! If you want to draw tax-free cash to invest in property then a 12-month per year income from UK property is a clear winner!


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