Did you ever think that a property would form part of your pension plans? The thought of saving for retirement always seems to be something that should be a job for tomorrow.
If we’re all honest, it’s a dull subject, right? Who honestly wants to sit and think where your income is going to come from in your old age once you’ve retired and either can’t or don’t want to work anymore?
That being said, the options we have to save for our pension are increasing in availability and variety, increasing confusion and apathy.
Perhaps, then, it’s time to take a look at our parents for ideas as to where to put our wealth in order to ensure at least a certain level of comfort by the time we retire?
They don’t always get a great reputation, the boomers, but here they’ve certainly hit a successful formula, so perhaps it’s something we should investigate a little further?
First of all, let’s look at the alternative options. You can save for a private pension through your employer and, indeed, the government actually introduced a law that said that all businesses employing staff must offer a pension option for their staff.
Rather than providing an ‘opt-in’ option where employees must let their employers know they want in, they are now automatically enrolled into the pension scheme. The level to which your employer is willing to contribute towards your pension will vary.
Secondary to that, you can also pick a private pension fund with which to invest in with a number of private banks and investment banks. Essentially, they all work the same – they take your money and invest it into stocks, shares, bonds and gilts with the aim of earning interest and a profit, meaning you’re aiming to have more than you invest.
You are, however, taking a risk that the investment company that you, or your employer, have selected know what they’re doing and don’t lose your money or decrease the value of it through bad investment decisions.
As an alternative to that, there’s property.
Property is a form of investment whether you’re looking to live in the property or rent it out to somebody else.
It’s an investment because it has an intrinsic value in your asset which either increases or decreases depending on the market. If it increases in value you have an asset worth more than you paid, and vice versa.
This will also depend on your mortgage arrangements, of course. As a landlord, you may use the value of your initial asset to borrow more from the bank to purchase more properties increasing your wealth.
Whether you think property is a better place to store your wealth with a view to increasing it is up to you, however, we should keep in mind one fact when comparing the two: since 2000 a house in Manchester has increased in value by an average of 143%, whilst the FTSE 100 stock index has increased from 6222 points in 2000 to 6460 in 2020, an overall increase of roughly 12%.