Pension Scheme or Property Investment? Which is the best plan for retirement?


Company pension schemes used to be the backbone of every large organisation and was seen as a major driving force to attract the best talent and more employees. Company pensions were made up of your monthly contributions and were usually strengthened by your employer adding a small contribution into the pot. Your pension contributions were taken out of your monthly salary before any Tax and NI had been deducted from your payslip. Company pension schemes were once seen as the lifeblood of the UK workforce with many people actively paying into their pension pots on a monthly basis in preparation for their retirement.

Are company pension schemes still as valuable as they used to be?

The UK economy has undergone some massive changes and growth within the last 30 years with more businesses and jobs than ever before. In an industry that is dominated by massive corporations and banking organisations it is becoming more and more rare for an individual to commit their whole working life to a single organisation which used to be the case 30 years prior. With that in mind the numbers of individuals using a company pension scheme have dropped significantly due to regularly opting for changes in job roles and organisations.

Many people regularly change companies in order to climb the career ladder which means less people are choosing to enroll on their own companies pension scheme simply because they do not know how long they will be working with that particular company for. These types of pension schemes work fantastically for long term employers but for the majority of people who change jobs every so year, there are other popular alternatives such as property investments.

Over 50% of Brits think that property is a better investment than a private pension scheme.

As much as 50% of working Brits believe that investing in property instead of a pensions scheme will be a more valuable investment. With less people opting to pay into a pension plan more brits are turning their hand to property investments with buy-to-let the arrangements the number one choice. Imagine you put £2,000 into your pension pot every year (average) in the hope that in 30 years time you will have £60,000 worth of savings in your pension. Now imagine putting a 10% deposit (current lowest deposit rate) of a £200,000 house which works out at £20,000 of savings and renting this property out for 25 years. When it comes to selling the property, not only will you get your £20,000 investment back, but the full £200,000 mortgage of that property would have been paid off thanks to the numerous tenants who would have rented it during that 25 year period.

Taking this into consideration, a £20,000 investment over the space of £25 years has just generated you a £200,000 pension pot, which completely outweighs the value of a private or company pension scheme. Property investments are a long term plan, gone are the days when you could buy a house, fix it up and sell it for a £25,000 instant profit. Investors are now choosing to purchase property and sit on their investment for 25 years and sell it for a massive return.

Depending on the area you choose to buy a house there may be a chance that the monthly rental value of that property alone can bring you in an additional annual salary. However if the rental value is just enough to cover the costs of the mortgage, the benefit is that your mortgage will be gradually being paid off without you having to contribute to it, which is the number one benefit of the buy-to-let industry.

From a pension point of view, purchasing property will give you the greatest return on your investment. Having another property to your portfolio also adds that extra bit of financial security should your family need to rely on this before you retire. Planning ahead and purchasing a property will be the best alternative should you choose not to take out a private pension.

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