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Entrepreneurs choosing property over pensions

Entrepreneurs choosing property over pensions
Photo: Rodnae Productions via pexels

Entrepreneurs seem to be leaning toward property rather than a pension for wealth generation, according to a survey. 

Private bank Brown Shipley has released findings from a survey of more than 800 UK entrepreneurs and wealthy individuals.

The survey found that entrepreneurs are more likely to have amassed their wealth through property investment, with 30 per cent attributing their wealth mainly to investing in property.

This is compared to 21 per cent for wealthy Britons overall. 

Lucian Cook, head of residential research for Savills, told FTAdviser: “It [residential property] has been a tried and tested store of wealth, to hedge against inflation historically.

"Clearly, the other thing you have seen for a 20-year period was rapid growth in the buy-to-let market in its widest form."

However, he noted that some of the regulatory pressures around buy-to-let are changing, such as the restated desire of government to do away with no fault evictions and increasing requirements around energy efficiency to allow clients to let their home.

Furthermore, the survey found that 51 per cent of entrepreneurs planed to use their wealth to provide an income in retirement, versus 61 per cent for wealthy individuals on the whole.

The survey also suggested there was an inverse disparity between pensions and property, with 40 per cent wealthy individuals attributing their pension as a main reason for their wealth, compared to 28 per cent of entrepreneurs.  

Among entrepreneurs, 31 per cent cited inheritance as a main reason for wealth, followed by salary, which 51 per cent of entrepreneurs stated as a main reason for their wealth, compared to 64 per cent for wealthy Britons overall. 

Moreover, 15 per cent of entrepreneurs believed that a lottery win or gambling has had a material positive impact on their levels of wealth, almost double the amount for wealthy individuals in the UK overall (8 per cent).

Gordon Scott, head of client solutions at Brown Shipley, commented: “Additional financial risk that comes with working for yourself, with capital tied up in the business and director salaries dependent on business performance, which may explain why many entrepreneurs look to bricks and mortar for broader wealth generation."

He added: "For the same reason, some entrepreneurs might be less willing to put their money into other companies through a pension, which will tend to be primarily invested in stocks and bonds."

calum.kapoor@ft.com