Is More Money Made In Property Or In A Pension?

Is More Money Made In Property Or In A Pension?
Las Paz Mexico by Julian Cohen. Why?

Having recently claimed to be unable to make the remotest sense of pensions, Bank of England Chief Economist Andy Haldane is now suggesting property could be better than a pension for retirement

Invest In Property Or Invest In A Pension: That Is The Question?

Is Property Better For Your Retirement Than A Pension?

In a recent interview with The Times, Bank of England Chief Economist Andy Haldane compared investing in property with investing in a pension for retirement.  Here are two of the questions and answers from the interview.


Andy Haldane

Bank of England Chief Economist

What’s Better For Retirement — Property Or Pension?

It ought to be pension but it’s almost certainly property. As long as we continue not to build anything like as many houses in this country as we need to meet demand, we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north. I would quite like the day to come when that wasn’t the case, but we’ve got a lot of catching up to do.

Do You Own A Property?

We have a house in Surrey — I commute, unfortunately — and a little cottage on the Kent coast, in Deal. We bought the Surrey house in 2002 for about £600,000. I couldn’t tell you a single thing about my mortgage, beyond the fact it’s an offset deal.

Andy Haldane’s View Of Property And Pension

Based on his earlier speech on pensions, if Andy can’t make "the remotest sense of pensions, it begs the question how he’s able to conclude that property, or anything else for that matter, is a better bet than a pension, even if it may be.

Let’s look at the numbers to get a clue.

According to The Times, it’s discovered from the Bank of England’s latest annual report that Andy has built up a pension currently worth £83,618 per year.  HMRC values this pension for Lifetime Allowance purposes at £1,672,360. 

Based on his answers above, chances are the current value of his pension is very close to the current value of his properties.  And if you factor in the cost of his mortgage over the years, his pension may indeed be his most valuable asset.  Interestingly, that’s also the position for many other people too.

It seems Andy’s pension is in pretty good shape and he needn’t worry.  That’s because it’s one of the most valuable pensions in the UK.  Perhaps that's why he doesn't take much interest in how it works.

Property Pension Debate Rages

When the Bank of England Chief Economist speaks, it’s reasonable people listen.  It’s also no surprise that key voices in both the property and pension industries are having their two-penneth as a result of his comments.  Here’s a snapshot for you.

Industry Hits Back At Andy Haldane’s View On Property V Pensions

Advisers and providers alike have attacked Bank of England chief economist Andy Haldane's suggestion that property is a better retirement investment than pensions... Property Or Pension »

Is Property A Better Bet Than A Pension?

Investing in property is a better bet than a pension, according to Andy Haldane, chief economist at the Bank of England... Property Or Pension »

Hard Numbers And Harsh Truths In Property Vs Pensions Debate

The provocative comments from Bank of England chief economist Andy Haldane that property trumps pensions when it comes to retirement planning have reignited an age-old debate... Property Or Pension »

Crunching The Numbers: Is Andy Haldane Right?

Houses are better investments than pensions according to Bank of England chief economist Andy Haldane. But is he right? And how can one decide?... Property Or Pension »

Les Cameron: ‘Property Is A better Bet’ – Really?

Considering the facts, says Les Cameron, any decision not to take advantage of pensions, or to 'cash-out' to buy an alternative asset such as a buy-to-let property, should not be taken lightly... Property Or Pension »

The Property Vs Pensions Debate: Why It Should Be 'And' Not 'Or'

Mark Canning explores the property versus pension debate and argues there’s a place for everything when it comes to retirement planning... Property Or Pension »

Nic Cicutti: Banking On Property Windfall Is Misguided

A few months ago, I wrote about my experience of applying for an increased mortgage in order to fund some additional building work to our home... Property Or Pension »

Bank Of England Chief Economist Says Property Better Than Pensions?

In an interview with The Times the Bank of England chief economist, Andy Haldane, said property was “almost certainly” a better investment for retirement and he could not make “the remotest sense of pensions”... Property Or Pension »

What Is Best For You: Property Or Pension?

There’s clearly no simple answer.  Both are long term investments and both are accompanied by advantages and disadvantages. 

You could, of course, combine the benefits of property ownership and the tax advantages of a pension by investing in commercial property within a SIPP. Andy’s comparison, however, referred to ‘houses’ not commercial property, and residential property can’t be held within a SIPP without you incurring horrendous penalties and charges from HMRC.

The most obvious conclusion is that diversification is probably the best bet.  Putting all your eggs in one basket is rarely a good idea.  So whether Andy has achieved it by accident or by design, in addition to the stocks and shares he says he holds via an ISA, Andy looks to have a pretty good spread of property, pension and other assets. 

And that’s reassuring, considering he’s a current member of the Bank of England’s Monetary Policy Committee whose decisions can seriously affect the returns on both property and pensions!

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