Why you should invest in property, not a pension

Over recent years a popular notion has emerged that putting your money into property is better than placing your income into a pension. During the current period of economic tumult, many people are hesitant towards property, therefore feel reluctant to invest in the UK housing market. However, buy to let investment can actually play a leading role in your retirement plan providing you perform thorough research on your property and use trusted companies like RW Invest to search for the most lucrative properties in the UK. Returns that can be made from property are both enticing and attractive to those thinking of investing, but you need to ask yourself how much disposable capital you have.

Sometimes a property purchase may involve a considerable initial outlay, as well as extra costs for renovations or management fees. Just for this reason, for some, it may not even be an option. Pensions, on the other hand, allow you to save for retirement steadily via achievable monthly payments over a much longer time frame. You need to think about what you can afford and what works best for you. If you are to look into the future and consider which option would make you financially stronger, then property certainly beats pensions in terms of returns as property is the only asset type that produces two different types, capital growth and rental income.

House prices have risen over the years, and more recently house prices in the three months to February 2019 were 2.8% higher than the same three months previous with the average house price now sitting around £236,800. House values were up sharply due to the lack of available properties on the market, helping prices to rise. Those who have invested in properties in the past will be able to reap their rewards due to the growth from the purchase price to what it is now.

Generally speaking, property is a concept that most people understand and can grasp easily, whereas pensions are harder to get your head around. Or perhaps you are more suited to a Lifetime ISA? This involves depositing money into an account until you are 50 years old, and the government provide a 25% bonus on top of your savings. However, there are fees associated with this process as if you wish to withdraw cash before you are 60 you will be charged 25%.

What you need to consider is, is a pension enough? Most people pay into a pension all their life, and when they come to retire, they are still tight for money. In the UK, the average pension pot is around £50,000 providing you retire at a normal age and pay over £200 per month. On the other hand, if you take a look at what property can offer, you will understand that you can cash in at any time, not to mention the fact that there are no restrictions as to when you can benefit from the returns.

Property investment will naturally cover their mortgage costs and although nothing is 100% certain, capital growth obtained by property, on top of a rental income, will outweigh any type of pension in terms of return on investment.

One of the main factors that makes property preferential over pensions is the fact that it is a tangible asset that gives people security, however, if you really want to be sensible and ensure that you will have a financially strong future, then it is important to diversify your assets.

Diversifying your assets involves spreading your money across different forms of investment. This way, if you have a slight doubt over one type, or one form of investment isn’t producing returns as high as you expected, you have a safety net whereby some of your top performing assets will help to level out your investments, so you are still profitable. Don’t place your entire savings into one single property and hope for the best, combine your properties with a pension scheme or property throughout different locations or property types.

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