Half the nation picks property to fund their later lives

This is according to figures released today (5 February) by the Office for National Statistics (ONS), which reported 49 per cent of the population interviewed between 2016 and 2017 choose property to fund their later lives, up from 40 per cent between 2010 and 2012.

By contrast, just 22 per cent of the respondents opted for employer pensions, falling from 24 per cent in the previous survey, before auto-enrolment was introduced.

According to Sir Steve Webb, director of policy at Royal London and former pensions minister, it is understandable that the public might imagine that property was the best way to save for retirement.

He said: "Physical property is much more tangible than a pension, and pensions all too often attract negative headlines.

Physical property is much more tangible than a pension, and pensions all too often attract negative headlines.Steve Webb

But the reality is that saving through a workplace pension is a hugely effective use of money, not just because of generous tax breaks but because of the money that an employer will contribute, according to Sir Steve.

He said: "In many workplaces the employer contribution will double your money and sometimes more, and there are few investments that can match this."

For Nathan Long, senior pension analyst at Hargreaves Lansdown, the ONS figures show that the twin benefits of employer pension contributions and tax relief are seemingly not whetting the appetites of pension savers.

He said: "It may not be until employer minimum contributions rise in 2018 and 2019 that we see this change.

"These findings also reinforce the widely-held industry view that reform of pensions tax relief in favour of a simpler, more compelling incentive to save for all would help to engage savers with the benefits of pension saving."

From April 2018, the auto-enrolment minimum total contribution will increase to 5 per cent, with the employee paying 3 per cent.

One year later, it will increase again to 8 per cent, with the worker paying 5 per cent.

A total of £17bn a year will be going into workplace pensions by 2019 to 2020 because of auto-enrolment.

Jane Goodland, responsible business director at Old Mutual Wealth, argued that in a surging property market it is understandable that people would bank on the asset for their future prosperity.

She said: "However, it is a fragile basis for a financial plan and is no substitute for a diversified saving and investment plan."

The ONS figures show, nevertheless, that employer pensions are considered the safest way to save for retirement for 40 per cent of people, which means that savers have brushed off any wider worries stemming from the BHS and British Steel pension problems, Mr Long argued.

He said: "This is all set against a backdrop of rising confidence in having enough to live on in retirement, despite falling levels of understanding in saving for retirement."

The numbers showed that only 54 per cent of men aged under 65 and women aged under 60, who haven't retired yet, are fairly or very confident that their retired income would give them the standard of living they hope for.

Only 41 per cent of those aged 55 plus having given any time to thinking about how long their pot should last for, which means pre-planning for retirement is a cause for concern, Mr Long added.

He said: "Your 50th birthday should be the point when your retirement planning is injected with renewed vigour."

maria.espadinha@ft.com