Is property the best investment portfolio for your retirement funds?

  • 10th July 2019

Many people invest in buy-to-let properties and see this as a safe investment of their future retirement portfolio. According to a recent article by Which, 2018 saw a rise in the number of buy-to-let mortgage applications from 65-75 year olds, but is investing in buy-to-let properties in your retirement the best and most tax efficient option?

There could be a number of reasons for this trend. Since the pension freedoms for those with defined contribution (DC) pensions came into force in April 2015, people have been able to access lump sums, or their entire pension in one go. Both of these, however, have the potential to result in a large tax bill.

Then there is the fall in mortgage rates leading to more attractive borrowing, plus lenders extending buy-to-let mortgages to suit older borrowers.

When considering property as part of your investment or retirement portfolio, there are a few challenges that you should consider.

You need to be aware of the impacts of the mortgage interest tax relief cuts, the 3% buy-to-let stamp duty surcharge and the tenant fees ban all of which could lead to reduced profit margins. When comparing buy-to-let with pensions, I would also consider the lack of tax flexibility – both income and inheritance taxation (see below) – generally associated with property investment, as well as the lack of liquidity when trying to raise funds. Whilst there is still tax relief available on mortgage interest payments, even retirees are likely to be able to get £720 tax relief each year up to age 75 by paying into a pension.

With buy-to-let, you need to consider things like bad tenants, missed rent payments, repairs, and government regulations such as minimum energy ratings. Conversely, a SIPP – this is a type of DC pension – is far less hassle and your adviser can make recommendations based on capital/ income requirements for the year ahead, the level of investment risk you are willing to take and invest your capital in a range of asset classes and geographic locations, rather than solely in property.

A property portfolio could also lead to a much higher inheritance tax bill for your family if the value exceeds the nil-rate band (£325,000) as, unlike a pension, there are no tax wrappers on property. It is always advisable to talk to a wealth management and investment professional before making any firm commitments for your retirement funds, especially in later years.

Overall, when you consider all these different factors, investing for retirement through a SIPP seems to make a lot more sense, in my view. It is less hassle and more tax efficient, and there’s the potential to generate strong returns from the stock market, if you allocate your capital wisely.

If you would like to discuss this or further Wealth Management considerations please contact Joe Rogers on 0333 11 222 11 or visit

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

Forrester Boyd Wealth Management Limited is authorised and regulated by the Financial Conduct Authority, the Financial Conduct Authority does not regulate most forms of buy to let mortgages.

Any news or resources within this section should not be relied upon with regards to figures or data referred to as legislative and policy changes may have occurred.

Information contained within this article is not a personal recommendation of Forrester Boyd Wealth Management. The wording in this article is not to be construed as an offer or advice. We recommend you seek advice concerning suitability from your investment adviser.