Which is the best way to save for your retirement? Over the past few years property, especially in the south-east of England, has received far greater returns. Chancellor Philip Hammond, however, wants to redress the balance.
Last September, Andy Haldane, Chief Economist at the Bank of England, caused a furore by stating that investing in property is a better way of safeguarding funds for retirement than by paying into a pension. In December, however, Chancellor Philip Hammond hit back, according to The Telegraph, saying in an appearance before the Treasury Committee that he wanted to discourage people from tying all their wealth up in property.
Using Japan, where there are high levels of household saving, as an example, Hammond said: “If we could persuade Mr and Mrs Smith to save like Mr and Mrs Watanabe to finance our debt then we might be looking at a different scenario.”
What are the advantages of investing in property? Well, the value of bricks and mortar in the UK has rocketed over recent years so it appreciates in that sense – then there are the monies that can be raised through renting a property out. Also, you aren’t locked in as you are with a pension so, if your circumstances change, you can sell it before you retire and invest the profits elsewhere.
There are disadvantages too, though. The property market can be volatile and you can also spend a lot in keeping your investment up to scratch maintenance-wise. A pension isn’t going to suddenly spring you with a bill for a burst water pipe!
Investing in property is also a lot more time-consuming than paying into a pension, with bills to pay, tenants to find and satisfy and, when the time does come to cash in on your investment, the rigours of selling your nest egg to endure.