Eighty per cent of landlords relying on property as a pension

I have just read this article in the Daily Mail online which states that buy to let landlords believe that their rental income will see them through retirement, effectively relying on property as a pension for a comfortable life in later years. Read the article here.

This article states that more than 80 per cent of private landlords are relying on property as a pension to see them through retirement, rather than a pension.

With all the changes we have experienced in our economy over the past 5 years it is extremely wise to have an alternative investment strategy to sit alongside your pension.

This is particularly true as pensions have taken a massive hit with both the performance of an Average Mutual Fun being severely below the projected compound growth rates currently quoted by Pension Providers of 5%, 7% or 9%. In fact the FSA are so worried that those saving in a pension are getting mislead that they have instructed the Pensions industry to reduce all their quotations by 2014 to rates of 2%, 5% and 7%.

Add to this the fact that Annuity Rates have slumped massively with us all living longer, the influx of money into the UK due to the Euro crisis and the affect of the Quantitative Easing programmes and it is hardly surprising that forward thinking individuals are looking at alternative routes to boost their pension years. Annuity Rates are projected to take another downward turn with the European Gender Directive (which stops Insurance companies discriminating due to Gender) which comes into affect from the 21st December 2012, followed by Solvency II next year which requires Insurance companies to hold more reserves to cover Corporate bond defaults.

It is anticipated that even when the yields of the bond markets improve that we will not see a massive increase in rates again as we are continuing to live longer and longer.

So having an alternative or complimentary investment strategy such as property investing allows you to truly spread your risk by not having all your retirement eggs in one basket.

Purchasing for cash flow is the key to success, and with rents rising across Britain having a property within your investment planning is extremely sensible. After all property represents an asset class which stands outside the Stock Market, so as long as you have budgeted for an increase in interest rates and the on-going cost of maintaining the property you can put money into your pocket each and every month.

As mentioned within this report most investment properties are purchased on an interest only mortgage, so if you choose to include property into your pension planning you should have a clear investment strategy as to how you are going to utilise your investment(s) for your retirement. Currently most banks have an upper lending age of 75 years. At which time you will be required to pay back the money they have leant you.

Of course inflation will have acted in your favour and eroded the ‘real value’ of the money you will need to pay, but you may still need to sell houses to pay off the capital owed on others.

Alternatively, of course if you do not require the rental income today to live off there is nothing to stop you leveraging your tenant to pay down your mortgage. If you go for this option I would recommend overpaying your interest only mortgage, as if it were a repayment mortgage. This way it offers you flexibility with your money. However you do need to be disciplined and if you would be too tempted to spend the money on non essential items then stick to a Repayment mortgage. If you plan it right when you come to retirement you wouldn’t have to sell any properties you don’t want to and you will have a retirement income that allows you to enjoy life.

Contact me if you would like to discuss your retirement options, including property as a pension.

 

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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