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Property Investment More Reliable Than Pensions to Fund Retirement?


Retirement is often a catalyst for investment. As more people begin to consider alternatives to their pensions, we examine why property over pensions is becoming a much more attractive option.

And can you blame them? With recent data showing that you might be working towards 65 for only £125 a week, it’s hardly surprising that savvy planners are looking at investment opportunities to supplement their later years.

Combine this with the increasing rarity of final salary pensions, as well as many people reaching the ceiling on their potential pension investment and you can begin to understand the need to plan ahead.

This is where property investment comes to the forefront. As a tangible asset (unlike pensions), property sits at the core of a potentially lucrative retirement investment strategy. It’s quickly becoming the norm for retirees to develop a buy-to-let portfolio in their later years.

In a recent survey we found that out of 1,200 people, 40% would invest in property if money wasn’t an issue. Property investment took a clear lead at the top, double the amount of the next top answer. Even one of the most senior economists in the UK, Andy Haldane from the Bank of England, has stated that property investment is the best way to save for retirement.

Although there are supporters on both sides of the property versus pensions debate, the evidence is clear. Property investment is an avenue to be considered.

So Why Choose Retirement Property Over Pensions?

There can be a number of reasons for choosing a property over pensions, most of which relate to the decline in value of pensions, rising living costs and the potential to earn both passive income and capital gains upon selling.

Rising living costs are a big concern for many that are already planning for the future, with research performed by the Centre of Economics and Business Research (Cebr) in 2015 showing a worrying trend. The report detailed how everyday living costs were expected to skyrocket by 2050, rising from £1,084 to £2,930 which equates to around 150%.

The same report estimated that to achieve a decent retirement income, anyone aged 35 years old would now need to build up a fund of £666,000 (excluding any state pension existing at the time).

Another reason for opting into a property is the increasing scarcity of final salary pensions. Hailed as the ‘gold-standard’ of pension options, a final salary pension is saved into each year of your working life and in return, you receive a guaranteed income following your retirement date. Unfortunately, these deals are becoming as valuable as, well… gold dust.

Brexit was a huge blow to employer’s willingness to provide a long-term expense of a final salary pension. The financial community as a whole was rocked by the vote, causing most final salary pension funds keen to provide short-term lump-sum incentives rather than take the long-term costs.

These ‘final salary transfers’ mean forfeiting any future payments but as a trade, a substantial, immediate lump sum is provided in its place.

Obviously, this doesn’t provide the constant stream of income that can be found with property and often, returns aren’t as substantial. By investing in a property, you buy into the potential for both rental yield returns and capital growth upon sale, two income streams that can provide an excellent means to build wealth for retirement.

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