“The FCA figures show that 1 in 5 people who fully encashed a pot of £250k or above used neither a regulated adviser or pension wise for advice or guidance. This is concerning as they would likely have been subject to a substantial tax hit on the withdrawal and there is the potential that they did not fully understand the tax implications of their decision.
“It is possible that much of this money has been used to finance buy to let investments. Research we undertook with YouGov last year highlighted that 13% of retirees intended to use their pension pots to invest in buy to let. However our research, and the FCA data, relates to a time before the Government announced significant changes to stamp duty on second homes and buy to let properties and we would expect to see the amount of large pots being withdrawn without advice reduce dramatically as a result.”
NB – Proposed Stamp Duty changes:
From 1 April 2016, an increased rate of Stamp Duty will be due on second homes, including buy-to-let property investments.
The additional rate will be 3% on top of the normal stamp duty applicable.
- For a £150,000 house sale, stamp duty will be £5000, in comparison to £500 today.
- A 200,000 house: £7500 compared to £1500 today
- A £300,000 house: £14000 compared to £5000 today