Skip to main content

Pension vs Property: Which is the best investment?

In the case of a pension vs property, there are many advantages and disadvantages to consider. Click to learn more.

Both pensions and property investment can offer long-term growth. For the older generation looking to fund their retirement, both can provide an element of support. In this article, we establish the pros and cons of pensions vs property as the best investment.

How property can fund a retirement

Despite both offering good investment returns, the differences between the two are important. Many people choose property as their pension, and those who haven’t had the opportunity to save for their pension often plan to sell their home and downsize in the future, utilising the equity release to fund the future years.

Another option, and the most beneficial, is to purchase one or more properties and rent them to tenants for a steady monthly income. These properties can increase in value as time passes, leaving investors with the choice to continue gaining a regular income or even selling the properties for a lump sum later down the line.

The advantages of property investment

While Savills predicts that the UK property market is likely to continue to weaken slightly after the announcement of the mini-budget, they still expect 7.5% growth for this calendar year. The property market always rises despite the difficulties, and demand for buy-to-let continues to outweigh supply, making it a steady investment as a pension fund replacement.

The mix of capital growth and rental yields promises both immediate income and long-term profit, but there are some considerations to keep in mind before making such a huge decision.

Potential risks

As with any finances, property investment comes with risk as well as reward. Monthly income is the perfect solution for many investors, but may not be enough to fund a full retirement if you’re still paying towards the mortgages. Think about the ongoing costs, and how much rental yields you can expect from each property.

Buying to sell also requires consideration, since it can take months to complete a sale and leave the owner without their retirement fund.

The advantages of investing in a pension

A pension is a long-term investment plan with the benefit of tax relief. As you pay money into the pension the funds will build compound interest over several years, making it a valuable investment over many other options. The earlier you start investing, the more you can benefit, and the combination of tax relief and employer contributions can boost it further.

Potential risks

The current age restriction for receiving your pension is 55, which is set to increase to 57 in 2028. As well as not being able to access the funds as and when you need them, a workplace pension is less flexible and doesn’t offer as much choice of investments, and you are expected to pay income tax on anything you withdraw above the 25% tax-free lump sum.

Numerous scandals in the media in recent history, including the infamous Robert Maxwell Mirror Group raid, have also caused many to no longer trust the pension scheme.

Making the right decision for you

Whilst deciding where to invest will always come down to your own individual situation, property investment has proven its worth time and time again, navigating the tumultuous last few years in particular extremely well. Research is crucial, and talking to knowledgeable property experts can help you develop a strategy and find the right property investments.

Having control over where you invest your pension can build your portfolio and keep your funds safe in such an ever-changing economy. Get in touch with us today to learn more about how we can support your investment journey and pension vs property queries.

    Are you interested in investing in property?

    Request a callback to discuss investment opportunities with one of our property experts.


    We respect our clients' privacy. Your personal details will not be shared with third parties. By submitting your details you consent to being contacted by Knight Knox by telephone and email for this and similar marketing material.


    Other Investment Opportunities

    • Read More +
      Vision

      Vision

      Prices from:
      £86,995
      Property type
      Student
      Location
      Huddersfield

      Investment Highlight

      Vision offers 8% assured NET returns for 3 years

      View Property
    • Read More +
      Rookery Manor Lodges

      Rookery Manor Lodges

      Prices from:
      £187,000
      Property type
      Holiday Let
      Location
      Weston-super-Mare

      Investment Highlight

      Rookery Manor Lodges offers 10% assured NET returns for 5 years

      View Property
    • Read More +
      Crawford House - Mossley Hill, Liverpool

      Crawford House

      Prices from:
      £174,915
      Property type
      Residential
      Location
      Liverpool

      Investment Highlight

      Crawford House will consist of luxury apartments in the affluent Mossley Hill area.

      View Property
    • Read More +
      St Mary's - Barnsley

      St Mary’s

      Prices from:
      £199,950
      Property type
      Supported Living
      Location
      Barnsley

      Investment Highlight

      St Mary's offers a 25-year lease with 9.1% yields and annual inflation-linked rent increases

      View Property
    • Read More +
      Image of Bradford city centre, the home of Chapel Street

      Chapel Street

      Prices from:
      £152,942
      Property type
      Supported Living
      Location
      Bradford

      Investment Highlight

      Chapel Street offers a 25-year lease with 8.5% yields and annual CPI increases

      View Property
    • Read More +
      Alexandra Tower

      Alexandra Tower

      Prices from:
      £213,500
      Property type
      Residential
      Location
      Liverpool

      Investment Highlight

      Alexandra Tower offers luxury Liverpool living with waterfront views

      View Property