Property as a pension or Pension Annuity?

An annuity is an insurance policy that you take, which provides you with an income for the rest of your life. In simple terms, a pension annuity allows you to take your money out of the stock market, sell those shares and they buy this insurance policy.

Annuity is based on various things –  and the sum you receive is based on your risk i.e. how long they will pay you. This is determined by your health, age, whether you want it the payments to rise with inflation or if you want an unchangeable payment, and whether your partner will continue to receive payments upon your death. If you take a level payment, annuity it starts higher but then every year you live you get poorer as the money you receive is the same but inflation erodes the purchase value of these funds.

To give you an idea – annuity rates at the moment for a male of 65 who wanted to take an annuity rate that would allow you to leave 50% of your income to your partner when you die, would allow you to keep tracking relative to inflation (3% escalation every year) then the annuity rate for £100,000 of investment pot would only be £3,335. This should give you an idea of how much you need in your pot to receive an annual income. Those annuity rates are likely to go down further – we are living longer and gender equalization which is affecting all insurance policies from next year (women tend to live longer and men live shorter so where they have taken that and given men a higher rate as they pay out shorter, they are equalizing them so women’s go down and men’s come up.) means that men will lose women will gain slightly. Solvency also affects annuity rates.

So with this in mind, how can we leverage property as a pension vehicle? Property sits outside the stock market so it isn’t related to performance.  Interest rates are extremely low so you can get some great mortgage deals and because our population is rising we have simple fact of supply and demand, with rental prices increasing annually. The cash flow can be leveraged, meanwhile someone else is paying the debt down for you. IT’s a different way of getting income into your pot – unlike annuity rates you have an income stream coming in from a route not affected by stock market.

So it’s a way to supplement or replace pension, it’s much more flexible and a safe bet. I have a pension, and believe that everyone should have one, but it’s a different asset class and allows you to add another income stream in retirement.

Read my audio about property as a pension.

Read my blog post about property a pension stacking up.

If you would like to discuss your pension options, contact me Gill Alton, at Alton Property Partners for impartial advice.

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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  1. Property as a Pension | Gill Alton | Listen to the Audio - November 19, 2012

    [...] my blogs on pension annuity and how property as a pension stacks [...]

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