Buy a BTL or fund AVC for early retirement?

or Both?

So I’m in the public service and will receive a decent pension at 65 if I complete 40 years service.
I’m on the old, better scheme where you also get 1.5 times final salary via tax free lump sum.

However, I hope to retire at 55. To do that I must either
a) take a massively reduced pension
b) resign and live off my own savings from 55-65 then draw down my pension

By going early I won’t have used all my tax free lump sum amount. I’ll therefore have c. 40K which I could take out tax free via an AVC.

I’ve can set an AVC up with Cornmarket (who have a deal with our union) to do just that. Hoping to put in say 25-30K over 20 years and see it grow to the 40K to max the tax free element.

Next question is should I save cash for the 10 years 55-65 or buy a BTL for long term cash flow?

I’m on track to be mortgage free in 5 years. That would allow me build up a deposit for a BTL with say a 15 year mortgage. Goal would be to break even on rental income less taxes and mortgage for those 15 years, giving me an asset at the end and then a rental stream into early retirement to help fund 55-65.

Is this far too optimistic? Do people recommend the BTL landlord life or all use management companies (to reduce hassle)?

I’m going to make the same 3 points that I make to anybody thinking of going down that road.

  1. It depends what you mean by BTL. Since you mention a 15 year mortgage then you are talking about Borrow To Let rather than Buy To Let. I think that’s a mugs game - you pay a huge amount in interest and if you also use an agency to collect rent (which you mention) then a very large proportion of your rent will go in those two items. Rents and property values have been rising over the last decade and that has shielded a lot of people who went down that road in the past. A property purchased at a time where prices are close to or on the long term price curve is a good store of wealth - but if you borrow for it, or it’s not priced for long term value - then it is the equivalent taking out a bank loan to buy shares at the peak of a bull run.

  2. You probably only have enough to buy one property - you can’t spread your risk. Imagine if one of the Kinahan’s moved in next door - or the area goes downhill for some other reason. Since you say you hope to be mortgage free in 5 years you are obviously already heavily invested in property. It sounds as though you don’t have a lot of other investments. So you would be sitting in a situation where you would be virtually 100% invested in property. Is that a good idea?

  3. Property is lumpy - you can’t sell a bit of it - it’s all or nothing and sometimes it’s hard to sell at all (see 2008 - 2012). If you felt happy being 100% invested in property and that that was the way to go then you could spend the next few years trickling money into property based funds (e.g. as AVCs to your pension) instead of trickling it into a mortgage - you would be getting tax relief on your pension contributions. You can switch a bit of it to a different fund if you feel the market is overvalued.

I am in a similar situation to you but further down the road. I don’t have a PS pension so can’t retire as the cash I have saved is not enough to see me through to pension age and to top up the state pension when that comes along. I have no mortgage. I am still working so am trickling money into a pension fund that is about 70% cash 30% equities at the moment, I am sticking with the equities because I am buying in to the market as it declines and it may or may not come back but I am getting my maximum tax relief - so I’m up about 90% immediately - you won’t be getting that relief with a BTL. Most of the cash is from funds that had made a lot of money and I wanted to bank - I am losing a bit on it but some of those were high risk funds that I would be losing a lot more if I had kept them.

It’s only advice, there’s no sure way through this - but I’d always go for diversity - property is too much work and there is too much to go wrong, you can reduce those aspects but doing so is usually costly. I already have one property, the one that I live in, and that costs a fair bit in maintenance!

Good luck whatever you choose to do.


Thanks for the thoughts, metalmike

Yes, I guess Borrow to Let is more accurate so! My theory of a 15 year mortgage to buy a rental would be to have the mortgage paid off before 55, so have a nett cash flow when I retire.

100% of mortgage interest is allowable these days on rental income which is attractive. A quick look on Karl Jeacle’s mortgage calculator shows me I’d either need a 4 bed to earn enough less tax and mortgage to break even or a deposit of 30%+.

TBH, I’ve always been risk averse. So this being be my only capital investment would make me a bit nervous. I’m not looking for a capital appreciation; more long term steady income. The biggest risk I guess is a tenant trashing the place or not paying and refusing to leave. To offset that, rent each room individually, not to a family? More hassle but less risk overall e.g. 1 of 4 tenants not paying is a lot better than 1 family not paying the lot.

I’d rather not use an agency but then hassle level increases. Guess it depends on what they charge.

The AVC I’m aiming for wouldn’t be massive either, just looking to fund for the max tax free lump sum. I could up those payments, into property based funds as you suggest, but again, cannot access that til 65.

Another option is to put cash in say Zurich managed fund. Can take it out quickly if needed, paying 41% exit tax on any profits.

So either a mix of

  1. guaranteed PS pension at 65
  2. AVC at 65 - aim to max tax free lump sum element
  3. cash in bank - to be used to fund early retirement at 55 until pension drawdown at 65
  4. rental property OR cash investment in Zurich balance fund (or similar) - as above, to fund 55-65

At what age does your actuarial adjustment end? 60/65? If it’s the lower it can mean that the years from 59-65 have relatively little impact on a coordinated pension. I would get a meeting with a Cornmarket consultant (they come to your house/workplace) and get them to project your pension at 55/58/60/62 or do the calcs yourself and get them to validate.

Invest in ETF through your AVC’s to maximise gains, purchase property through your pension at retirement to have asset backed, relatively secure income through retirement.

All it takes is one bad tenant who will not pay rent or overstays and you are in trouble
Good landlords are suffering because of the sins of their predecessors
Its very hard to evict a tenant and the RTB is weighed towards the tenant so its not a risk free money maker any more

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The actuarial adjustment is for life unfortunately, not til you hit 65. So if you
go at 64, 1 year early, you get 98% of your lump sum and 94.8% of your pension
go at 60, 5 years early, you get 90.7% of your lump sum and 74.8% of your pension
go at 55, 10 years early, you get 82.4% of your lump sum and 58.2% of your pension

So retiring early has a big cost. To avoid this you either don’t retire or effectively resign and wait to draw down at 65, So you need savings to live off til then.

I hear you. Those prospects are very off-putting.

My theory there would be rent 4 rooms individually. You’d be fairly unlucky to have more than 1 not paying at the same time (famous last words…)

I’d be mortgage free on my PPR and still working while the mortgage was being paid off on the rental, so could make up the difference if needed.

Tax bill lower too if making a rental loss (can offset it off future rental profits)

I looked into ETFs before and the tax charges on profits was massive. Doing it through an AVC is interesting. Must look into it.

Buying the BTL with my pension lump sum at 65 reduces the risk alright as no mortgage. But doesn’t solve my income needs 55-65 if I was to retire early.

Got you but some people myself included have a different table of factors applying which taper to 1.0 at 60. If that had applied to you the maths would be more favourable. Best of luck with it.

it all depends on the DB scheme and how changes were made
With mine its a certain % on earnings up to 2010 ,then a different % on years after that
Lump sum is related to last years salary and years of service
Revenue have a formula for it

Dont go through Conrnmarket for the AVC setup, go through an independent trustee that has an agency with conexim(99% would). Execution only basis if you dont feel like paying an advisor. You’ll have a better allocation rate, lower charges and freedom to invest in whatever you want…

Yeah, no way around the consequences of retiring early unfortunately.

I see a risk in that equity returns going forward will not be what they use to be - db pension funds and life assurance funds are already struggling with this concept. So any kind of investment may not live up to your return requirements or even a reasonable premium above zero, accounting for risk of an investment. So do really think whether there is justification in putting money in anything other than cash. Inflation may be better than losing money.

I work in the investments industry, or a particular part of it, and the charges are becoming a problem because the gains after the charges has been getting smaller and smaller.

The other risk is that the government has a history of raiding private pensions so this may be used again once they need to pay for the pandemic supports. The government will likely raid as many avenues which have cash potential to them with little resistance- water charges no, but how many people protested the pension charge?

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Yep, I’ve learned that lesson with a few misguided investments. I stopped working a number of years ago with a wodge of cash. Inflation has been very low (or even negative) for a good chunk of it. I took advantage of high retail interest rates back around 2012 to lock in some great returns from our dodgy banks for a few years, and was actually saving money while earning none from employment. Also bear in mind, when you’re retired you don’t care about the CPI, but just the things you spend money on.

I wouldn’t trust a pension as far as I could kick it, but am lumbered with one anyway. I don’t even know when I can draw it down as I’ve never depended on it. But it stays in cash for most of the time apart from quick switches to the highest risk equities when conditions look favourable. Got back into equities when the market was distraught about the pandemic and back out when it was over-exuberant about the prospects of recovery, making a better percentage in two months than my presumably expert pension fund manager managed in a decade

You can only make money when you’re not doing what everyone else is doing. That’s why I look askance at the gold thread on here. Lot’s of people buy gold in a panic at the thought of “money printing” when in fact the markets fly to the US dollar, not gold, in times of uncertainty. Inflation needs more than money printing, it needs people to be chasing goods with that money. Because of the nature of QE, the people doing the chasing are the already rich, and the main things being chased are assets like property and equities which is why those have endured such crazy bubbles. I doubt they can be sustained in the long run, which is why I take such a dim view of pensions.

All just my tuppence worth… I haven’t the slightest qualification in finance, just my observations over a number of years of what the herd is doing, and learning from my own mistakes.


There was a time in the boom when I mused about BTL in a vague, overoptimistic way. Now all I can see is the hassle and risk that I avoided. Dealing with difficult tenants would have put me in a deep and enduring energy deficit. A friend of mine in Canada did well at it but he had multiple properties to reduce the risk, a rising market and a wife from India who relentlessly micromanaged every conceivable detail. Now that I’m retired, I think simply spending less is an easier path for me than supplemental income streams.


When you retire you want hassle free income
I would rather 700 euro a week hassle free than 1000 a week and hassle
You are supposed to enjoy your retirement.
I am lucky in that I will have a DB pension with 38 years service when retire this year as well as a pot of cash.
Its one of the reasons we got out of rental properties a few years ago
younger brothers still do it but I cant be doing with the hassle at 60

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Even renting 4 rooms individually the tenant has the same rights as everybody else
One bad tenant and its a headache