Property vs pension

EdInvestor

We've already discussed pension vs ISA - but this doesn't seem to be the question in most people's minds.

http://www.ifaonline.co.uk/public/showPage.html?page=ifa2006_articleimport&tempPageName=464550

The rising popularity of alternative forms of investment to fund retirement is threatening the private pensions industry, assurance software firm Mastek has warned.


A survey of more than 2,000 people found 66% were opting for products other than traditional pensions to fund their lives after they're 65.Brian Please, director for UK insurance at Mastek, says: “People are losing faith in pensions as vehicles to provide for them in retirement and the industry needs to react to the changes in saving habits we have seen develop in recent years.


“It’s the return on the investment and the inflexibility of getting at that money when they might need it.“Savings of any form are good. To most people that means their house and a house that was traditionally there for inheritance purposes turns into a necessary asset for pensions.

It's not hard to see why this is happening.:(

Pension payouts plunge 78% in 10 years

dunstonh

It's not hard to see why this is happening.:(

Not for the reason you say though.

People assume property only goes up and the stockmarket had a major crash early into the millenium. Short memories and lack of knowledge and experience, along with media deciding that anything called "pension" means the same and is bad, means that people have chosen other methods which may or may not be better.

God knows how many times I have heard people say that they invest in ISAs now because the returns are better. Clearly totally inaccurate reasoning on two counts. 1 - pensions and ISAs can have the same investments and 2 - they are comparing a sustained growth period against a period that included a major crash.

EdInvestor

The reason pension payouts have fallen is due much more to the collapse in annuity rates than the stockmarket crash.The stockmarket has now almost recovered.Annuity rates have not and probably never will because people are living so much longer.

The pension outlook is thus much less favourable than it was in the past - with a pension you cannot avoid the effect of annuity rates, whereas you can with an ISA or a property.

If you look at using a BTL as a pension, the history of the property market is quite comparable to the stockmarket in terms of returns.Gearing the investment is possible at low risk via the mortgage. The tenant provides the equivalent of a company contribution or tax relief and if a person stops paying pension contributions then that money provides a cushion to cover repairs, voids etc.It is easy to avoid paying CGT on the proceeds and the letting income is usually tax free because the mortgage payments can be offset.The market itself is much easier to understand.

You can easily see why many people regard it as potentially a better bet.

DavidLaGuardia

There are merits and drawbacks with every type of investment but most of thethe publicity that has had a negative impact on pensions is unfortunately lirrelevant to private pensions today. People have seen new reports of floundering company schemes from the extremes of Maxwell to the negative (but understanble) move by many employers out of final salary schemes. Add to this misselling scandals where people lost though opting out of company shcemes and reducing annnuity rates (depite the fact that relative to lower inflation they are not that bad) and the result for many is an automatic negative perception.

Bit like a toothbrush moustache. One automatically thinks Hitler and forgets that Oliver Hardy also had one.

A_Nice_Englishman

Many people may consider BTL as a 'better bet' than pensions, but personally I would not be comfortable with all my wealth (plus borrowed money) being in residential property - or any other single place for that matter.