Property Or Pension? One Makes You £83,000 Richer

Lisa Smith, BA (Hons), CeFA

Landlords and pension savers have long had a simmering disagreement about the best way to save – but new research shows one method would make investors £83,000 better off.

For millions, bricks and mortar is the investment of choice for retirement, while for millions of others, a personal or company pension is the best tool.

But the pendulum that swung in favour of landlords a decade ago may have moved the other way as the government has acted to cool buy to let by introducing draconian taxes on rental profits and capital gains.

To try and answer the age-old question, investment manager 7IM compared the performance of an average pension pot with average home prices from 2005.

The result was while home values soared by 52%, pensions fared even better and increased in value by 135%.

The argument rumbles on

In financial terms, someone investing £100,000 in 2005 would now have a property worth £152,000, while a pension saver would have £235,000 – take one from the other to find the £83,000 difference.

Of course, the result could depend on the period selected and going not so far back or even further could have produced a different result.

Other factors could contribute as well.

The pension investor could take less risk, while a landlord might argue the investment return does not include rental profits after tax.

Both investors and landlords must pay tax on their gains – landlords when they dispose of their property and investors when they draw an income from their pensions.

What about cryptocurrency?

Clearly, the 7IM work needs buffing up to give more meaningful figures as the current batch hint at an answer but leave a lot of room for argument.

The real answer is investors or landlords should not put all their financial eggs in one sector.

Pension savers would do well to include property in their portfolio, while landlords should diversify into stocks and shares – but in companies not tied into land or property.

Another what’s best question comes to mind – property, pensions or cryptocurrency?

Perhaps that should be left for another time…

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