Making property as boring as pensions

There is one question that routinely causes a row: do you invest in property or pensions?

Almost every famous person answers the former, while hardly any invest in shares or funds.

(The notable exception was Frank Bruno, who was not only a savvy investor, but a committed saver.) 

 If you speak to the man in the street, the idea of property as some kind of holy grail still persists

Life is different for the wealthy and I can see why they may want to diversify, but the problem is for many, property is their only investment.

In fact, they are banking on it for their retirement.

The additional issue is that this rhetoric supports the idea that property is the best asset to invest in to retire.

Certainly if you speak to the man in the street, the idea of property as some kind of holy grail still persists.

Last week, insurer Royal London published a survey that found 29 per cent of 45-to-55 year olds were considering using pension freedoms to withdraw cash and buy property.

Read that last sentence again if you need to. It is quite clearly madness, but I can believe every word of it.

Indeed, Royal London’s research looked at how those cashing in a pension to buy property could face 66 per cent tax bills, which I bet many would wander into blindly.

I understand why so many Brits believe in property: they have seen house prices rise beyond their wildest dreams.

They have an asset they love, have spent thousands renovating, and where their children grew up.

They are attached to it and it has made them money. You do not get that with a pension.

But we all know it is not real cash, because you have to sell to realise it and that is where it gets very expensive.

What is strange is that with investments and pensions we have become very familiar with debates about charges, and even though, in general, pension fund fees are extremely low, conversations still rumble on about their value.

Yet for some reason when it comes to investing in property, those attracted to it routinely fail to add up the fees.

It is not just stamp duty; it is the cost of the mortgage, surveyors, agents, rental voids, renovations, capital gains, income tax and so on.

And besides, running a buy-to-let empire is hardly retiring, as you will be managing it until you are kicking up daisies.

Property remains in a different realm to pensions and investing but we have been treating them differently for too long.

The only way to win the argument for ordinary investors is to start comparing them like-for-like.

By all means let’s look at property price growth alongside that of shares, and compare the yields.

But let’s find a way to talk costs and tax too. Making property boring – like pensions – is the only way to make savers realise the downsides of the roof over your head.

It’s not easy being green

There is little wonder that ethical investing seems a mess. What ethical, sustainable, green or socially responsible means is so subjective, that no one company could ever match the demands of investors.

But as the recent report by SCM reveals, it appears nobody is making sure funds that claim to be hitting environmental, social and governance targets are actually doing so.

Worse than that, Fidelity was caught out for having a search tool that included mainstream funds when investors searched for ESG – raising the ugly spectre of mis-selling.

There is appetite for ethical investing for younger savers, but fund managers need to stop greenwashing their investments, improve transparency and make sure that when they say they are being green, they really are.

Scandalous

You will hear a lot of financial promises made during the election – but I can bet there is one you will not hear: a pledge to fix net pay pensions.

I know this is a fantastically dull subject, but it is one with extraordinary ramifications.

Millions of our poorest workers – mainly women – are being denied tax relief on their pensions because of the computer systems of their employer and HM Revenue & Customs. 

But because this is an issue that affects low earners, who usually do not know about it, and requires a dull man from IT to fix it, no one ever will.

And meanwhile, cleaners, baristas, carers, shop assistants and the like are all poorer for it. What a scandal.

James Coney is money editor of the Times and the Sunday Times

@jimconey