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Take control – property or pension, which is best for your long-term future?


Article by Gill Fielding

50plus finance property or pension image
Are you ready for the biggest opportunity in your lifetime to take control of your own financial future?

The pensions overhaul which came into force in April 2015 will allow savers aged 55 and above to withdraw some or all of their pension pot as a lump sum instead of being forced to take the increasingly poor incomes provided by an annuity.

For someone who has saved up a pension pot of £200,000 a typical annuity will give them an income of £9,400 per year which is £784 per month to live on.

Could you live on £784 per month when you give up work?

Well fortunately the government has thrown us a lifeline and the changes in 2015 will enable us to take control of our pension funds and take responsibility and start doing something purposeful and profitable with it – hooray!

Even though many people have now cottoned onto the fact that there’s something happening, most people aren’t really sure what it is and most importantly how the changes will affect them.

But – as you no doubt already know – the time to confront these decisions is now. As both pensions and property investment work by incremental input over time, the longer you can give yourself to accumulate their benefits, the better!

Using property as a pensions vehicle

While any self-respecting finance advisor will tell you that establishing a pension is the best basis for any investment portfolio, there are some great advantages to using property investing as a pension vehicle. If done correctly, property investing can provide you with the monthly income and lifestyle you want to give up work… and still leave an inheritance for your children.

Often a traditional pension can be eroded over the years by inflation. The great thing about property is that if you set it up correctly and, let’s say, you want to derive your income from it, you’ll discover that as the cost of living rises – so do your rents. By contrast, if you were to link an annuity to inflation, it could cut your monthly income in half.

The other great thing about using property investing as a pension vehicle compared to a traditional pension is that as the value of your property increases over time you have an appreciating asset to leave to your spouse, your children and future generations. Compare this with a traditional annuity where, unless you accept a lower monthly income, when you die your spouse is left to live on half the pension – with more or less the same outgoings – and certainly there would be nothing left for your children and future generations.

Using income from property

Using income from property as you move into retirement can leave your capital untouched and appreciating, your income keeping up with inflation, security for your spouse and a legacy for your children and future generations. Plus, if used in conjunction with an existing pension fund it can act as a pension stabiliser, giving you a more balanced portfolio.

Investing in property for Capital Appreciation may need more attention than deciding on a pension plan: to achieve a good lump of cash for retirement, you want to ensure that your property increases in value more quickly than the general market. Putting some work into identifying properties in up-and-coming areas, with potential for extension or remodelling, doing your research to make sure there’s nothing wrong with the current valuation, will be essential to protecting your investment. Similarly, waiting for properties to come up in alternative markets – at auction, buying direct, in probate etc – will help you save money and find bargains where sellers are looking for a quick sale.

Property investing has always been my passion. For over 40 years property has given me the financial and time freedom to do the things I want to do with my life. Many other people I know also have the freedom of not having to go to work because they have sorted out the money side of their lives by investing in property. I have always wondered why it is that more people don’t invest in property: for me it is a no-brainer. Speak to anyone at a party and invariably they will have a tale of a property they should have bought 5, 10, 15 years ago, how much it is worth now and how they could have retired on it!

50plus finance Gill Fielding property expert imageSolving the Property Puzzle: A guide to successful property investment by Gill Fielding is available on Amazon priced £12.99. For more information go to www.fieldingfinancial.com.

Take control – property or pension, which is best for your long-term future?


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