Preparing for Retirement: Pension vs Property
Traditionally, saving towards your pension has been considered the best way to prepare for retirement. However, a new survey by the Office for National Statistics (ONS) has revealed that nowadays most Britons believe investing in property is the best way to save for retirement. So pension vs property?
Back in 2010, the UK data office started asking Britons what they believe is the most lucrative way to save for retirement. At this time, pensions and property were both considered to be rewarding – however, since then house prices and the number of people who believe property is the best investment has soared.
The latest survey, which measured data from July 2016 to June 2017, has found that almost half (49 per cent) of Britons think property trumps pension savings when it comes to preparing for your retirement.
Unsurprisingly, the second most popular option was ‘employer pension schemes’ – as voted by 22 per cent of those surveyed.
In light of this news, here we have provided an overview of the ways in which you might use your property to fund your retirement when the time comes:
If you’re prepared to move home, downsizing could put you in a very comfortable position financially – particularly if your property has increased in value since you bought it. Aside from a smaller home, you could consider other housing options which free up some money, such as a bungalow, a retirement property, or perhaps even a cheaper location abroad.
If you want to avoid the long, drawn-out selling process, you could opt to sell through a private home-buying company such as We Buy Any Home. Our financial advisors will provide you with an initial offer within 24 hours of contact – enabling completion on a house sale in as little as seven days so that you can start enjoying your retirement as soon as possible.
RENT OUT A ROOM
If you’re not prepared to sell your property, you could consider renting out a room or a part of your home to make some extra cash. This is a particularly appealing option for homeowners with larger houses, or who live in areas where there are lots of renters, like London.
If you do decide to let out some space in your home, you will become a resident landlord and will be eligible to enrol in the Government’s ‘Rent a Room Scheme’. By letting out furnished lodging in your home, this tax efficient scheme allows you to earn a threshold of up to £7,500 per year – tax-free.
If you don’t want to move away from your family home but need to access more money than renting out a room will permit, then equity release may be the best route for you. Equity release schemes allow you to access your property’s value for more cash in retirement, by tapping into the wealth you’ve accumulated in your property.
With a ‘lifetime mortgage’, you can borrow a proportion of your home’s value, and interest will be charged on this amount – however, nothing will have to be paid back until you move or pass away.
Alternatively, a ‘home reversion’ scheme allows you to sell a share of your property to your mortgage lender for less than the market value. You can remain in the property, however, when you move or pass away it will be sold, and the lender can claim their share.
While properties are now considered to be the most rewarding investment for retirement, saving towards a pension is still very worthwhile. With many company pensions, your employer will also contribute money towards your scheme – so you’re essentially earning free money.
You may not be able to save as much as a property is worth, but the money you put by will still go a long way when you come to start your retirement journey.