Property preferred over pensions for performance

Property preferred over pensions for performance

Employer pension schemes are considered to be the safest way to save for retirement, according to the latest official figures, but people believe property investments will result in higher returns

The Office for National Statistics Wealth and Assets Survey of UK adults, which quizzed people between July and December last year, revealed 38 per cent  of the population identify company pensions as the safest investment.

This marked a slight fall from the previous period reviewed (40 per cent for July 2014 to June 2016). 

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Stocks and shares, and premium bonds were considered the safest options by the fewest number of people.

However when considering which method of saving will make the most of an individual’s money, property was the most popular option, chosen by 49 per cent of the population, compared with 20 per cent for employer pension schemes.

Since July 2010  the percentage of people identifying property as making the most of their money has been increasing, which may reflect a growing confidence in property prices over this period.

In contrast, the popularity of individual savings accounts (ISAs) and savings accounts has been decreasing, possibly reflecting low interest rates over this period affecting people’s attitudes towards these types of investments.

Nathan Long, senior pension analyst at Hargreaves Lansdown, suggested the figures pointed to confusion with pension planning being worryingly on the rise. 

"Investing in property is seen as the best way of making most of your money despite it being one of the least tax efficient ways to invest. 

"More people are now citing a lack of understanding as the reason they are not in their workplace pension, even though auto-enrolment means most will not make any decisions whatsoever to join. 

"The tail end of the retirement journey also is starting to show signs of people expecting to work longer, but with more than a quarter of older people not properly planning their retirement the reality could be even more severe. As people live longer and the cost of social care rises, the likelihood of inheritances acting as additional income in retirement falls."

Respondents who have not yet retired were asked to select all the sources they expect to provide income in their retirement from a list of 15 options.

The state pension has been the top option consistently since July 2010 with a small increase in the number of people giving this as the top option in July 2016 to December 2016 (86 per cent) compared with previous periods (81 per cent or 82 per cent).

The next most popular option was occupational or personal pensions with 68 per cent of respondents giving this option as a source of money for their retirement. 

Less than half (42 per cent) of adults aged under 40 or those aged 40 and over and not retired agreed (strongly or tended to agree) that they knew enough about pensions to make decisions about saving for retirement.

The vast majority - 84 per cent - of employees were aware of auto-enrolment, with employees under the age of 35 a little less likely to be aware of the workplace savings scheme (80 per cent) while those aged 55 and above (that is, approaching retirement) were a little more aware (86 per cent).