BLOG: Property v Pension – Which is Best?

We are often asked this question at Kelvin Valley and have many conversations with people approaching retirement age about investing in property. It can be quite a frightening reality check to people who are fast approaching retirement, to suddenly realise that they are not going to have anywhere near enough income to live comfortably when they finish working.

Most people are aware that they should be saving for their future and that the decisions they take in earlier life will affect them in later life, but the problem is that many people defer making any conscious effort until they are in their 30’s and 40’s with a family. By this stage, it becomes considerably harder to put enough money into a pension to achieve a comfortable retirement.

A report commissioned in 2020 found that the average UK private pension pot was only £61,897 in value, which would result in an annual retirement income of just over £3,000 which at £250 per month is clearly nowhere near enough to live on even when you add on the State pension.

In fact, to receive an annual pension income of around £12,000 to provide you with £1,000 per month in retirement, you would need to have a pension pot valued in the region of £300,000. This is often beyond the reach of people who started saving too late, or simply don’t have the income to support such large payments into their pension in the first place.

Which then brings us to our case study, which poses the question – how much money do I need to achieve £12,000 of net rental income?

We have already established that you would need circa £300,000 in a pension to achieve £12,000 per annum or £1,000 per month, but how much money would you need invested in property?

You may be surprised to find out that it is nowhere near as much as £300,000. In fact, it is significantly less! In the areas we operate in, £12,000 of net rental income can be made with the purchase of three 2 bed flats or two x terraced houses! And the good news is, that the initial cost of acquiring these is actually below £100,000 so less than a 1/3rd of the value of a pension. How can that be so you ask? That is where we can help here at Kelvin Valley.

When you also factor in that property values go up over time, and that the income is available right away (no need to wait till you are 67, or even worse 77 because the age keeps going up!) then you start to look at property investment in a different light and realise that having every last penny in a pension linked to the stock market may not be the best idea after all!

Here at Kelvin Valley we have helped hundreds of landlords begin their investment journey over the years, and our superb Lettings Team is on hand to answer any questions you may have. We are not advocating doing away with your pension, and as always you should seek professional advice, however if you haven’t at least considered property for part of your retirement income, then we can definitely let you know that you are missing out!

Contact our Lettings Team for more information on 0800 133 7775 or email lettings@kvps.co.uk