The pension issue simply won’t go away, the vast majority of the population are not saving for retirement and the UK has huge debts to pay off reducing pensions for public sector workers, is it any wonder that property offers a more stable alternative?
It used to be the case that pensions were the boring investment you made starting at the age of thirty when retirement was something your parents worried about. Not much has changed there, what has changed though is the return you are likely to see on all those years of contributions.
Most of that money you invest in the early years will find its way into equities, which as we know are in an unprecedented period of volatility with few ups and many downs over the course of the past four years.
As a result the ‘boring pension’ has been replaced with a rollercoaster pension ride no-one can feel safe on.
FTSE down 4%, bank shares down 25%
In 2011 alone the FTSE was down by nearly 4% in 2011 and bank shares were down 25% in the same period, so with further volatility expected in 2012 as a result of the sovereign debt crisis, the dramatic ups and downs of the world’s stock markets are likely to continue for at least a 5th year running.
Against this backdrop it is little wonder that property, which provides an excellent store of value in the long term has become the new ‘boring’ for those who simply want to maintain living standards in retirement.
Is £18,000 a year enough to retire on?
As a 30-40 year old, I would rather have somewhere boring to put my money and guarantee something to live on in retirement. Recent reports suggested that even a £300,000 pension pot is likely to provide an annual income of just £18,000 per annum, not much even by today’s living standards. `
Not surprisingly, DWP data from this year shows that less than only 40% of us are putting money into a private pension and just three in 10 people aged between 20 and 40 saving for retirement. This leaves 7 in 10 people with no plan A let alone a plan B for the future. On top of this less than four in 10 Britons are making their own provision for retirement.
So what is the answer to growing pension apathy?
Saving for the future needs to be more exciting…
Property in contrast to other asset classes has performed better than equities in the past 12 months and the long term merits of investing in property are well known.
Auto enrolment pensions are seen as the answer to this growing problem, but this enforced saving for retirement is unlikely to make the pension any more appealing which is why property offers a better answer to those with cash to invest.
The Knight Frank Prime Global Cities index shows that luxury property prices increased by 4.3 per cent globally in the year to September 2011.
Property is a tangible asset that performs well in the long term
People like property because it offers something tangible rather than a piece of paper full of data that is hard to understand. It also offers flexibility and an income even before retirement. One of the biggest barriers to investing in buy-to-let was tax , however even this can be avoided by investing via a self invested personal pension (SIPP).
5-star boutique hotel resorts in the Caribbean offer just such a solution at surprisingly low entry levels, so it is worth shopping around to how investing in property could offer a far more exciting future to a traditional pension.
