Half the nation banks on property to pay for retirement

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Half the nation banks on property to pay for retirement

Britain's property "obsession" is damaging the retirement prospects of millions of people, a group of pension experts have said.

It comes after research from the Pensions and Lifetime Savings Association research showed nearly half (47 per cent) of 35 to 54-year-olds or 8.3 million people were planning to use property to help finance their retirement.

But 23 per cent or 1.9 million people in this group have yet to buy a property meaning some may be basing their future financial security on an asset they may never own.

The group of people to express concerns about this retirement strategy include former pensions minister Sir Steve Webb, now director of policy at Royal London.

He said: “There is no doubt that the word pension has appeared in headlines alongside the word ‘crisis’ and ‘scandal’ far too many times.

"It is entirely understandable that putting your money into bricks and mortar is attractive. But those who have experience as small landlords know that there are many hidden costs and complexities associated with buy-to-let investing."

Kate Smith, head of pensions at Aegon, said: “As a nation of homeowners we have an obsession with property, a fixation that sadly hasn’t yet extended to pensions.

"Constant tinkering to pension tax rules does little to promote their popularity. A period of stability to build up people’s confidence and engagement with pensions is long overdue.

“Rather than extending the remit for Pension Wise into property, people should get advice before they decide to cash in their hard-earned pensions and sink it all into the property market.”

Almost two in five landlords (37 per cent) regard their properties as their “pension pot” as UK rents hit the second highest peak ever recorded in November, according to national estate agent Your Move. 

The average rent in England and Wales reached £900 in October while the average rent per-calendar-month in London reached £1,290 per calendar month. 

Richard Parkin, head of pensions policy at Fidelity International, said: "Pensions does have an image problem. I can’t remember the last time I read a positive story about pensions in the papers yet we constantly read about how much money people make on buy-to-let.

"Pensions do have a lot to offer. Auto-enrolment delivers basic rate taxpayers a return of 70 per cent on their own savings just from the employer contribution and tax relief and unless tax rules are changed significantly then that’s guaranteed.

"Market returns are then on top of that. I’m not sure many property investments can come close to that but I’m not sure many employees understand that.”

stephanie.hawthorne@ft.com