A recent survey by The Office for National Statistics shows that one in three now see property as a way to pay for retirement. With property value skyrocketing, it is not surprising that 29% of people aged 25 to 44 years old see property as a far more favourable investment than private pensions. Average house prices in the UK have substantially risen from £57,000 in 1990 to £225,000 in 2018, making property a perfect investment opportunity for many.
The recent work place pension scheme ensures that employers pay 2% of your qualifying earnings into a pension fund, yet the Pensions Protection Fund only pay 90% of the work place pension if your company becomes insolvent. Although the PPF becomes responsible for providing the majority of your work place pension, you may lose 10% of your pension investments. This is why more and more people have decided to invest their money in properties instead.
Property investment is fast becoming a popular business venture for many, with properties offering a 7-10% yield interest rate compared to the 2% average return of cash ISAs and private savings accounts.
Investing in property also offers a steady income from rental payment from tenants and also offers opportunities for long term profit through property value increasing over time.
Although property investment is a long term and time consuming business venture, it is exceptionally rewarding and highly lucrative with annual house prices rising across the UK, for example 4.8% in Wales and 7.2% in Liverpool over the past 12 months.
However, experts warn that the British public could put themselves at financial risk if they choose to invest solely in the property market. Instead they suggest that investments must be made in varying ranges from property, to savings accounts, to private pensions.
Although The Office for National Statistics reported that a third of the population saw property as a more beneficial investment than private pensions, 40% of those surveyed between July 2016 and December 2017 still favoured company pensions. The introduction of the work place pension scheme has restored faith in the pension programme, with people viewing it as a sound and trusted way to save for the future.
Property investment poses many financial risks, most importantly the high entry costs the market requires. With interest rates alternating constantly, you may find that the money you invest into a property becomes lost – you don’t have the financial means to maintain it, nor does the property interest other investors or tenants. The high-risk opportunity does however present endless and ever-growing benefits for those willing to take the leap.
Pensions also have their own risks. Work place pensions now require employers to contribute, as well as being covered by the Pension Protection Fund. However, pensions offer little financial return and are difficult to access prior to retirement.
Both property investment and pension schemes offer benefits and disadvantages. Following guidance from experts and the unforeseeable future of both markets, investment choices should not be taken lightly and require research and consideration into the best option for you.
Author Bio
Hopwood House are property investment specialists, with a wide range of investment opportunities in the UK student, buy-to-let and care home investment markets.
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Daniel Peacock