On retirement can I invest my DC pension fund in a house to let ?

Mutton_Geoff

Albermarle said:

leosayer said:

MEM62 said:

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

I agree with that and would add that you can get access to the property market in a pension via property funds which invest in commercial property like offices, shopping centres, warehouses etc. 

This has a lot of benefits over buy to let as someone else does all the work and there's less concentration risk as funds hold multiple properties. 

However given the relative risk and return of property funds, many might choose a more diversified portfolio to include shares and bonds.

I have a commercial property fund and it nosedived during Covid - 70% at one point . Followed by a good recovery up until the start of 2022 and then 60% drop during that year, with some mild recovery in 2023. So as you say best to keep property a low % of your portfolio !

Same here, Schroder Global Cities Real Estate. ASIN GB00B1VPTY75. Looks like a yoyo but I'm on par with cost price of my purchase 3 years ago. Hold 2.5% of my SIPP in it.

leosayer

Albermarle said:

leosayer said:

MEM62 said:

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

I agree with that and would add that you can get access to the property market in a pension via property funds which invest in commercial property like offices, shopping centres, warehouses etc. 

This has a lot of benefits over buy to let as someone else does all the work and there's less concentration risk as funds hold multiple properties. 

However given the relative risk and return of property funds, many might choose a more diversified portfolio to include shares and bonds.

I have a commercial property fund and it nosedived during Covid - 70% at one point . Followed by a good recovery up until the start of 2022 and then 60% drop during that year, with some mild recovery in 2023. So as you say best to keep property a low % of your portfolio !

I remember reading somewhere that a typical global equity index fund is around 7% exposed to commercial property by virtue of the balance sheet of the underlying companies that form the index.

I now can't find the source for that but it was one of the factors that made me sell the L&G Property fund that I held. That and the weird pricing load - a 4% increase or decrease on the NAV price depending on whether there were net subscribers or redeemers. AND the risk of gating the fund which seemed to happen with other funds with increasing frequency.

Albermarle

leosayer said:

Albermarle said:

leosayer said:

MEM62 said:

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

I agree with that and would add that you can get access to the property market in a pension via property funds which invest in commercial property like offices, shopping centres, warehouses etc. 

This has a lot of benefits over buy to let as someone else does all the work and there's less concentration risk as funds hold multiple properties. 

However given the relative risk and return of property funds, many might choose a more diversified portfolio to include shares and bonds.

I have a commercial property fund and it nosedived during Covid - 70% at one point . Followed by a good recovery up until the start of 2022 and then 60% drop during that year, with some mild recovery in 2023. So as you say best to keep property a low % of your portfolio !

I remember reading somewhere that a typical global equity index fund is around 7% exposed to commercial property by virtue of the balance sheet of the underlying companies that form the index.

I now can't find the source for that but it was one of the factors that made me sell the L&G Property fund that I held. That and the weird pricing load - a 4% increase or decrease on the NAV price depending on whether there were net subscribers or redeemers. AND the risk of gating the fund which seemed to happen with other funds with increasing frequency.

Normally it is better to have these type investments in an investment trust rather than an OEIC fund. The IT will never get gated, although it might be a bit difficult to buy and sell shares in it during periods of very high volatility.

UrbanAchiever

Mr.Generous said:

I suppose you could look at like this if you want to invest in a rental property from pension pot....

Would you prefer to pay the tax man 25% tax or a bank 6% interest?

Take the max tax free lump sum and use it as a deposit, don't pay a load of tax to get into the rental game.

If you go this route buying in a limited company is the only way to go.  If you buy it in your own name, you cannot offset all the mortgage interest costs against income so your personal tax bill will be higher than you might expect and makes it much less viable.

I'm 49 and have 2 BTL properties. The day to day admin and aggravation isn't too bad (both were new builds when we bought 11 years ago).  However my plan is to sell both when I retire early - 2 reasons: 1) government meddling with buy to let which has introduced more cost and hassle, which I expect to get a lot worse when labour are in power (possible rent controls, landlord licencing etc); 2) my reason for planning to retire early is for a simpler less stressful life and the ability to travel the world while I'm still young.  Neither of these are compatible with providing housing to people. I'm looking forward to putting the equity into index trackers which never cause me any grief and look after themselves.

NeverOutOfWork

I am so pleased I asked the question on here, thank you all, your advice is invaluable and I will not be doing that, I shall leave it in the pension fund.
Happy new year everybody !