Property Vs Pension: Which is the Better Investment?

February, 2018

When it comes to saving for retirement, most people put money into a pension as they work. This is something of a ‘go-to’ option in the UK, with employers now even legally obliged to enrol workers on a pension scheme and contribute something towards it. But in recent years, more and more people have been investing in property as an alternative to a pension. Why? Read on as we compare the two choices of investment. 

Pension in a property 

So, how does property work and a pension alternative?

It’s simple really. Rather than putting money in a savings pot, people put it into buying buy-to-let property. As the name suggests, that property is then rented out while they pay off the mortgage. Once paid off, this gives them a valuable asset, which can be sold in their retirement to provide returns on their investment. 

The advantages of property investment 

Investing in property almost guarantees a large return than the interest on pension savings, according to experts. It’s also much simpler than pension investments in many cases. While people know about property from experience, they tend not to be able to explain exactly how their pension works.

The other main strength is that property can provide monthly income, even while paying off the mortgage. With renters typically paying more than the cost of mortgage repayments per month, a mortgage investment can offer a small ongoing boost to your finances while working. On top of that, property offers a method of savings which isn’t necessarily locked away until retirement age. 

Some points to consider 

All that said, property isn’t a natural option for all investors. Without disposable capital, it’s simply not an option to invest in property. The initial deposit, plus costs for renovation and management can make buy-to-let unsuitable for some people. There’s also so the potential stress of owning property, which is brought to light when the boiler breaks, or tenants refuse to pay, for instance.

With tax relief and high-interest schemes like the Lifetime ISA on offer from the government, pensions are still an attractive and smart way to save for most people. Rather than requiring any lump sums, they allow you to save with affordable monthly investments from your wage. Normal pension schemes are also beneficial as employers pay in too. 

Need some help? 

When it comes to saving, it’s simply a case of working out what’s best for you. For those that can afford it, property investment is certainly a lucrative option. And if you’re looking to invest in your future through property, Weale and Hitchen can help.

We are an independent estate agency with an abundance of local property knowledge. Our friendly team of experts can help with everything from acquiring property to the finding tenants. Contact us today or visit one of our five branches in either Bury, Holcombe Brook, Ramsbottom, Harwood or Rawtenstall.

Recent Articles