The impact of recent changes to the way buy to let properties are taxed could create the next pension crisis, a trade body is warning.
With more people becoming reliant on property to fund retirement, the National Landlords Association says 77 per cent of landlords - approximately 1.8m individuals – say they are reliant on their residential property investment for their retirement.
Meanwhile findings from a 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 per cent of people saying it represents a good way to plan for retirement.
However, the NLA cites figures from the Office for National Statistics estimating the average retired household spends £21,770 every year; this 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 this would require savings in the region of £300,000, which is why the association says so many people have turned to property to provide for later life.
“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” insists NLA chief executive Richard Lambert.
“Some 27 per cent of UK landlords are already retired, and 37 per cent are aged 55 or over, so there is a pressing need to tackle these issues without delay” he adds.
The NLA is calling on the government to help those affected adjust their financial plans by tapering the amount of capital gains tax landlords will need to pay when they come to selling their property, based on how long they have owned and let it out for.