Is It Better to Invest in Property or a Pension?

When it comes to retirement, most people have the same ambition: to spend their latter years doing what they love without worrying about scraping by. But what’s the best way to build a nest egg to keep you secure in your old age? Let’s look at two popular forms of investment: buy-to-lets (BTL) and pensions.

Reasons to invest in a buy-to-let

Landlords can enjoy a monthly income plus capital growth.
The property market has been buoyant over the past decade, with prices jumping 73% between 2013 and 2023. (Source: ONS)
Demand for rental properties is high - a trend that looks set to continue. Average UK yields are 5.6% (Source: Zoopla).
Investors who enjoy DIY, have a trade or an eye for design can add significant value to a property.
If you know the local market, you may be able to invest in an up-and-coming area before prices surge.
You can sell your buy-to-let whenever you want, whatever your age. Although the transaction will take time to complete.

Considerations

Being a landlord comes with obligations and legal responsibilities. Many investors get a letting agent (the cost of which is tax deductible) to handle the day-to-day management of their BTL.
Property prices can fluctuate, and there may be times when your buy-to-let is untenanted. However, you can get insurance to cover the loss of rental income.
As a landlord, you’re responsible for covering repairs and maintenance.
You may have to pay capital gains tax should you sell up.

Reasons to Invest in a Pension

You may be able to claim some tax relief on pension payments.
Depending on the type of pension, your employer may make contributions.
If your pension is a SIPP (self-invested personal pension), you’ll have flexibility over where you invest.
You can take small sums from your pension when necessary (age permitting). You don’t have to cash it out all at once.

Considerations

Commonly you must be 55 to access your pension. (This jumps to 57 in 2028).
Most pension funds invest in stocks and shares, these can rise and fall.
Some workplace pensions offer little choice as to the nature of the investments.
Your pension provider will charge you fees.

The hybrid option

To diversify their investment portfolio, some people invest in a BTL and a pension. While not everyone can afford to do this, if you’re in a position to do so this is an option to consider.

Disclaimer

With all major investment decisions, it’s always best to consult a financial adviser for recommendations tailored to your situation.

Contact us today to learn more about investing in the local property market.

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