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Property or pensions – which is best for your retirement?


For the overwhelming majority of people in the UK, suggests an article in Landlord Today on the 9th of April 2018, retirement income is likely to come from one of just two sources – property or pensions. For many, it might come from both.

But if your choice is either property or a pension to fund your retirement, which is likely to prove the more reliable or more lucrative performer?


Within the last century or so, there has been a massive change in ordinary people’s ability to invest in residential property. At the beginning of the 20th century, only 10% of homes were owner-occupied, explains Economic Online, yet this has surged to some 70% of the 27 million households that exist by the end of 2017.

Of that 27 million households, 70% own their home, a further 16% own home which are let privately to tenants, and the remaining 14% are owned by housing associations and local authorities. 

That means that some 86% of the population has their own home to live in during retirement or own buy to let property. It has made investment in residential property the preferred option for nearly 50% of the population, said a story published in the Financial Times on the 6th of February 2018


  • the widespread popularity of such an investment is hardly surprising – in the 35 years between 1983 and March of 2018, house prices have increased by an average 365 index points, according to figures produced by Trading Economics;
  • for long-time homeowners nearing retirement and with the mortgage repaid, therefore, this represents a considerable nest-egg;
  • converting that equity in the property into retirement income may be achieved through downsizing or by opting for an equity release scheme;

Buy to let owners

  • if you have invested in buy to let property, of course, you may enjoy the rental income it generates – despite the challenges thrown up by increasing regulation, as described in our post of the 9th of April 2018;
  • when the running of a buy to let business proves too onerous as you get older, you may sell the property and cash in on any capital appreciation.

But there are decided drawbacks to relying on property ownership to fund your pension.

In addition to the tax changes which have challenged the profitability of many buy to let properties, it is important to take into account the expenditure required on their upkeep and maintenance – expenditure which also needs to be made on any main residence you own.

In addition, there are other ongoing expenses, such as homeowners’ insurance or landlords’ insurance.

If you need to access the capital tied up in any owned property, of course, a sale might take some time to conclude – especially in an uncertain housing market.


An article in the financial pages of the Daily Mail on the 22nd of March 2018, on the other hand, pointed at the many tax advantages of having your savings and investments in your pension pot.

Furthermore, access to your pension fund and the ability to enjoy the income it generates is far more straightforward – especially since it no longer requires you to tie yourself into an annuity for the remainder of your life.

Recent changes – described by the Pensions Regulator – to the minimum amounts that need to be paid into an auto-enrolment defined contributions pension scheme are also likely to increase the size of your eventual pension pot.

From the 6th of April 2018, the minimum contribution rises from 2% to 5% of your qualifying earnings and is set to increase again from 5% to a minimum of 8% in 2019.

As the BBC noted on the 6th of April, the increases may come as something of a “harsh jolt” for many pension scheme members – but the payoff comes when they eventually come to take the enhanced pension such payments are likely to fund.

To return to our original question about whether property or a pension is likely to deliver the better income in retirement, therefore, there is something to be said for both methods. Careful financial planning – done early enough in your working life – and seeking professional advice - may allow you to have both.