Pensions or property? The big debate

Most people think that pensions are boring and that property is glamorous, but which one will give you the return you want when planning for your retirement?

Pension or property

You probably know at least someone with a buy to let property, you may even have one yourself. “That’s my retirement nest egg right there.” They often say.

If you don’t have one then maybe you secretly harbour a desire for one. “I’m going to be left behind without a second property to sell on for my retirement.” you might say as you scour the property listings for two bedroom flats in the local area in need of a bit of a fix up.

Homes Under The Hammer becomes bookmarked as a favourite on iPlayer and Kirsty and Phil are your new life coaches as they peddle their charismatic brand of “You too can be a property tycoon.”

But in reality what will a property portfolio of just one yield come retirement age?

Well, obviously that depends on how much you paid for it, if indeed you did pay for it and didn’t inherit it when Aunt Mabel popped her clogs after Christmas dinner 3 years back – “Terribly sad, but she died happy and left us her bungalow, so every cloud and all that.”

Not a viable alternative to a pension

The fact is that in many cases a single investment property won’t yield the same returns as a decent pension scheme.

I could go into the maths here but I would have to put so many caveats in that it would spoilt the flow.  Safe to say that unless you managed to pick up property in Knightsbridge 40 years ago for an absolute steal, it may not stand up as your primary source of income.

You have to do the sums, and this is where speaking to a professional can really help.

Independent Financial advisor, Nick McBreen from Worldwide Financial planning says: “Savings based pensions may not be as glamorous as property, or as tangible, but they often yield a better retirement income in the long run than one or maybe two investment properties.  Especially if these properties are mortgaged to the hilt.

“Property can certainly enhance your retirement pot, and can have some tax benefits too, but if you are relying on it entirely then it’s unlikely you will be able to tick off everything on your bucket list when you finally finish working.

“A more sensible approach, though often a bit dull, is to have a balanced approach to retirement planning, some of which may include a buy-to-let property, but will also include a steady, well managed pension.”

Plan for retirement, don't just wait for it 

So, no one is telling you to ditch that two bed flat that brings in a steady income in the middle of town but if you haven’t done the maths yet it’s probably a good idea to speak to someone to help you come up with a retirement planning package that will work for you on all levels.  Including your inner Allsopp.

For a free, no obligation initial chat about your individual finances, call us on 0800 0112825, e-mail [email protected] or take a look at our website

Last modified: June 10, 2021

Written by 9:24 am Property