Invest your Pension in Property

With the recent news that Carillion had gone into liquidation, leaving yet another black hole for the Pension Protection Fund to absorb, financial experts are calling into question how many more large hits can the PPF carry, making consumers start to wonder – just how safe is my pension fund, and what sort of returns are really possible.

The truth is that, as people start to live longer, pension pots are beginning to diminish, and although the government is now putting the onus on employers to contribute by way of top up, the days of living out retirement in relative comfort based on workplace pension are ceasing to exist.

Therefore many of the UK’s workforce are looking for alternatives to traditional pension schemes, and turning instead to property investment to fund the retirement which they envisioned.

Pension vs Property – Which Offers The Best Return?

While actual returns will depend on a wide range of factors, property values have risen by an average of 6.9% each year since 1980, even factoring in the global downturn in 2008.

However there are cost considerations for those choosing to invest in property. In addition to traditional costs, such as property management, allowing for void periods, tax and maintenance   more recent changes to tax relief on mortgage interest an increased stamp duty charges have seen some investors reconsidering the focus of their property portfolios.

While pensions continue generally to offer a safe bet, with longer life expectancy, combined with increasing living costs, many of those planning for retirement are becoming disillusioned that can enjoy the standard of living in their retirement which they had expected. In fact, research published by the Centre for Economics and Business Research shows that over 1 million households expect to need to borrow in retirement to meet daily living expenses.

Benefits of Investing in Property over Pensions

For many, the fact that property investment is a tangible asset – it is after all built of bricks and mortar is alluring. A property investment is not hidden within a range of stocks and shares over which the pension holder has little or no control.

Additionally investing in property gives freedom not offered by pensions. There is an incoming revenue stream from the rental, and should circumstances change, owners are able to sell off the asset, dip into the revenue stream, or failing all else – live in the property.

While pensions now offer more flexibility than previously, the minimum age of draw down is 55, and this can incur penalties. Combined with a rising retirement age, property is starting to appear to be an appealing option for many.

Matt Lavin, Director “Many people feel that investing in bricks and mortar, IE tangible physical assets gives them added comfort and security. Buying property for the long term has proven to be one of the strongest performing asset classes available and ignoring the ups and downs of the typical property market cycle, should lead to wealth accumulation over time. Even with changes to stamp duty, loss of tax relief on mortgage interest etc, property still tops the list for clients looking for long term income and growth”


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