The property versus pension debate has been raging for decades, with investors around the world having strong feelings over which retirement funding solution is best.
Although the war often makes for interesting conversation, it doesn’t have to be an either/or situation. You don’t have to pick a side and stick to it.
Instead, a multi-asset approach to financial planning can help you build a diverse, secure and flexible portfolio that grows over time.
The tax benefits that come with pensions are hard to deny, but investing in property at the same time can provide you with a bridge to retirement.
In fact, according to LV=’s Wealth and Wellbeing Monitor, more affluent consumers looking to retire early are twice as likely to use the value of their homes to fund their retirement.
With that in mind, here are a few things to consider.
A multi-asset approach to financial planning
Pensions can be extremely rewarding. Workplace pensions offer tax relief, employer contributions and investment gains.
Private pensions are also a smart move for anyone looking to save for retirement in a tax-efficient way.
Making the most of your pension is just one part of the puzzle, especially if you have a large amount of money that you’d like to spread across a multitude of assets.
The stock market is of course another popular option, with many investors turning to ETFs and index funds or building their own stock portfolios themselves.
As we’re about to explain, property deserves a place in your portfolio too.
Property is more passive than it used to be
Property investing is far more passive than it used to be. It’s possible to invest in bricks and mortar without becoming a landlord.
If you want to reap the rewards of rental income, but you don’t want to try your hand at finding tenants or managing repairs, there are people who can do all this for you.
Your property portfolio can become a valuable source of passive income, while you focus your time on your work, other investments or simply living your life.
Specialist financial advice can help you increase your profits
Since April 2020, mortgage interest can only be offset up to the value of basic-rate tax relief.
This sparked frustration amongst many higher-rate tax paying investors because they’d previously benefited from 40% relief on mortgage interest.
However, a growing number of investors, particularly those with large portfolios, are investing via limited companies due to the tax advantages that this strategy offers.
Seeking specialist advice can help you determine whether this is a smart move for you.
With the right help, you can increase profits and make the most of your investments.
The pandemic has highlighted the need for flexibility and resilience
While it’s impossible to predict the future and few people could have seen COVID-19 coming, the pandemic has highlighted the need for flexibility and resilience to mitigate the impact of future events.
Of the UK adults surveyed by LV=, 39% had to change their retirement plans in some way as a result of the pandemic.
Some accessed their retirement savings early, but for many of those who have all their money tied up in pensions, withdrawing money early can be a challenge.
Pensions have their advantages, but they aren’t as flexible and versatile as property can be.
When you own property, you have countless options for both short-term and long-term income. In addition to regular rental income, there’s also an option to remortgage or sell your properties if you need access to large sums of money at once.
That’s why we encourage a best of both worlds approach. By spreading money across multiple assets, you can diversify your portfolio, reduce risk and ensure your money is working hard to bridge the gap between you and retirement.
This communication is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity.
