FSA cuts pension projections, property as a pension could be the answer.

The FSA has said that the returns on pension plans need to be reduced from 2014 so that they show more realistic returns than the projections currently used.

Having recently reviewed several online pension projection calculators I found that they all automatically projected my pension pot on the basis that it had grown by a compound growth rate of 7% per year.

This is highly misleading as the average Pension Funds have not performed consistently at that level for years and years, so this means years and years of projected income will never materialise. It was only by going into the ‘advanced options’ button that I could change the projected growth rate from 7% to 5%.

This 2% drop may not seem a massive difference but under the power of compounding this can have a dramatic affect on your end Pension value. For example saving £500 a month for 25 years on a 7% compound growth rate would be projected to give you a pot value (in today’s terms allowing for inflation over that period at 2.5% pa) of £234,481. Now change the growth rate to 5% pa and the value of the pot would only be £179,433, amending it to 2% growth pa takes the projection right down to £123,294 (in fact at this level having taken inflation into account your fund would not be growing in real terms at all).

In each case you have put the same amount of money into your pension fund, however the outcomes are clearly different. Expecting £234,481 and receiving £123,294 is a bitter pill to swallow.

A big dollop of realism may be difficult to take, but it is definitely required as its the only way that families can be treated fairly and honestly. Allowing them the opportunity to make informed decisions about their financial futures and potentially look for alternative investment solutions to fill the gap which has opened right in front of them.

Personally I have chosen to invest in property alongside my pension so that property is a pension as part of my retirement strategy. It allows me to work with a completely different asset class and bring in an additional income stream which is unaffected by the Stock Market and Annuity Rates. The investors I work with have also understood the benefits this provides in bridging their pension gaps.

If you would like to discuss property as a pension, or property as part of your retirement strategy, contact me, Gill Alton at Alton Property Partners.

Gill Alton

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Gill Alton is the founder of Alton Property Partners, which provides a comprehensive and personal Property Portfolio Building Service for investors in the UK.

Alton Property Partners manage the entire investment process, from sourcing property at a discounted value, co-ordinating the Mortgage, arranging the refurbishment, right through to ensuring it is ready for the rental market.

The service is specifically aimed to support those who recognise the value of a UK investment portfolio, but lack the time, or knowledge to be able to invest for themselves because they are full time employees or Business Owners. With full consultation and comprehensive financial analysis, clients can be assured that their portfolio of strong yielding properties will be built to exacting standards and they will be kept up to date every step of the way.

Having been involved in property for 16 years Gill has built a personal portfolio for her family, and in addition to Alton Property Partners, runs a Property Mentoring Business, Venus Property Mentoring which focuses on supporting new investors onto the investing ladder. Having originally left the Corporate world to be a Qualified Mortgage Broker, Gill’s husband now focuses on their family Mortgage Brokerage in Maidenhead – Alton Mortgages.

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Alton Property Partners
6 Bramble Drive, Maidenhead BerkshireUKSL6 3NX United Kindom 
Gill@altonpropertypartners.co.uk •0845-095-5060

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