Andy Haldane, Chief Economist for Bank of England, recently mentioned that property is a better investment for retirement than a pension. For the typical saver there are key points to consider before taking these views into consideration –
Pensions
- Tax Relief on Pensions means that your contribution has grown 25% even before the money has been invested.
- Taking money out of your pension after 55 is easier to do so than selling a property.
- Saving into a pension means that you have ring-fenced that money for your retirement.
- You can start pension savings for as little as £50 a month.
Property
- Buying a property using a mortgage lets you gain more if the property grows, but can also cause you to lose more if the property reduces in value.
- “Bricks and Mortar” have shown to grow 23% in the UK over the last 10 years a 2.3% return per year and this doesn’t include the rent received.
- If you haven’t lived in a property for some or all of the time you’ve owned it (a buy-to-let property, for example) then you may be liable to pay Capital Gains Tax of up to 28% when it’s sold.
The points above are a summary and each form of investment has its own benefits and detriments. Both these options can be used effectively as part of a diversified portfolio.
As always we welcome the opportunity to discuss the options available. Contact Platinum and our specialist advisers will be glad to help.