Property v Pension – What’s The Best Retirement Plan?

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Choosing how to grow your money for a comfortable retirement is a vexing question for many investors – and there doesn’t seem to be a correct answer.

Picking the right investment horse to back is tricky and can have lifestyle changing repercussions when you reach retirement age.

The favourites are property and pensions, but which one, if either, is best for you?

Independent money mag Which? has looked at both and concludes striking a balance between the two rather than putting all your financial eggs in one basket is probably the best course of action for most savers.

Property values have undoubtedly skyrocketed in the past two decades, but there is no guarantee a specific property will add value.

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Property as a pension

The price someone is willing to pay comes down to location, state of repair, the neighbourhood and countless other factors – including how the economy is performing and if buyers can get a loan.

Buying a home as a pension with a view to downsizing or equity release is a risk.

Downsizing means finding a smaller house that meets your needs, but this comes with financial and personal costs, like leaving friends in an area you know and living with less space and trimming a lifestyle to fit.

Equity release can be an expensive way to access money and will dent any inheritance you want to leave loved ones.

And then there’s the risk the cash locked in your home is not enough to fund your retirement anyway.

Unlocking financial goals

Pensions are also influenced by outside factors, like stock market fluctuations, inflation, the economy and politics.

Richard Ealing, head of pensions at comparison site Moneyfacts, told Which?: “The value of a pension fund will be determined by the underlying assets it’s invested in, for example, equities, gilts and bonds.

“Other factors that could have an effect on pension fund growth include things like the economic environment, political uncertainty, new government policy and more.”

So what is the key to funding a comfortable retirement?

“The key to unlocking your financial goals is striking the right balance between your short-term savings objectives, which might be a housing deposit, home improvements etc, and long-term goals, such as retirement” says Which?

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