It's considered common knowledge for some that physical property investments are more dependable for retirement planning than market based investments.
This view persists even in the face of a relatively moribund housing market and large increases in property taxes.
The Office of National Statistics confirmed this in a recent study, with 49% of those surveyed asserting that property provides the best returns, beating both workplace pensions at 22% and ISAs at 6%.
In addition to the fact that property is viewed as the superior investment by most people, the trend towards this is increasing when the current year's data is compared to previous years.
This opinion is not supported by reality according to experts. The yields on stock market investments over the past 2 years have increased, with rental yields on buy to let properties falling in the same period.
According to estate agency network Your Move, the yield on buy to let properties in England and Wales is 4.3% which has fallen from 5.1% at the end of 2015. This compares with the FTSE 100 which has yielded 4.4%.
Claire Trott of Technical Connection which offers tax advice asserts that:
“Many people like property because it is tangible and they believe that it is a great long term investment. The reality is that property is difficult to trade and can take time to sell."
Old Mutual Wealth the fund manager recently ran a comparison between £90,000 invested in property, pensions and ISAs. If the recent reforms on buy to let had not occurred, property would have been the clear winner after 25 years. However, coupling the current pension regime with property growth estimated at 2% per year, the property investor would have been worse off at the end of the period.
It's important that your investments are well diversified and suitable to your needs and objectives as part of a comprehensive financial plan. Contact Westminster Wealth today to put yours in place.
The value of investments and income from them may go down as well as up and you may not get back the original amount invested.
Information is based on our current understanding of taxation legislation and regulations which is subject to change.
Past performance is not a reliable indicator of future performance.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Relying on property for your pension? This is the risk you're taking