Property investment for retirement

5 November 2016

Property investment for retirement

This month’s survey by the Office for National Statistics reveals that property investment for retirement is the most popular form of investment.  

45% of respondents said that property was the best investment for retirement, a rise from 40 per cent in 2010.  

This is almost twice as many as the 25% who think a company pension is the best option while personal pensions fared even worse, with only six per cent thinking that they would provide the best return on their money.  Stocks and shares were favoured by just eight per cent, ISAS by seven per cent and Premium Bonds by only one per cent of respondents. 


In August, Bank of England chief economist Andy Haldane alarmed some economists when he candidly admitted he thought property investment for retirement was better than a pension. 

This is despite the tax benefits that come with a pension, and employer contributions that effectively amount to free money towards retirement. 

Furthermore, while wealth secured in a pension can be accessed from the age of 55, wealth wrapped up in property can only be released by selling it, which is problematic for those who want to continue to live in it; downsizing; or through equity release, which can prove expensive.

Buy-to-let has proven to be one of the most lucrative investments in recent decades.  With average rental yields, considerably exceeding dwindling interest rates, and with the unpredictability of world stock markets, it is easy to see why buy to let has become a popular means of investing for retirement even though this year’s curbs on tax relief and additional stamp duty could hold back future gains.

Agreeing that property investment for retirement reflected the populist view, Richard Wazacz, of Octopus Choice, said: ‘While a company pension scheme may be considered the safest route to save for retirement, people still see residential property as the asset class that will generate them the best returns. ‘Investments in, or secured against, residential property are generally seen as the ones that will deliver the strongest returns over time.’

Kate Smith, Head of Pensions at Aegon, has a different view ‘Recently we’ve seen a lot of conflicting commentary about saving for retirement through a property or a pension. The question of returns is complex but we’d argue that for most people their property is a home not a source of retirement income. 

Rising prices and rents

In September, the ONS revealed UK property prices increased by 8.3 per cent in the year to July 2016, after years of similar annual increases.  The average trend in rents also continues upwards, increasing by 2.3% in the year to August.

This latest research shows that the British love affair with bricks and mortar shows no sign of abating and that property investment for retirement continues to grow in popularity.

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