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Pension vs Property in the UK: Should I Invest My Savings Rather Than Put Them in a Pension Pot?

For decades people have put their monthly earnings into a pension pot for when they retire. This may seem like the only logical explanation for many people, but there are others out there too. Rather than putting your savings into a pot and allowing the savings to collect dust until your retirement days arrive, you can invest that money into a stable and secure asset such as property. The decision to invest your money rather than allowing it to only gain interest through an account is often deemed a huge one. Understandably you’re taking a risk with any investment type, but if you do your research first, then you’re sure to feel more confident with your choice.

In this quick guide, we will address saving for your pension in a traditional way, using a pension pot. However, the decision is ultimately up to you, whether you choose to invest your savings before you retire or you want to be more traditional is entirely your choice and should not be taken without serious consideration. Below we are comparing the two and what might be best depending on your financial situation.

Investing in Property

Out of the two choices, investing in property is the one that is going to get you the biggest and best return. If you’re a savvy investor and choose to invest in a high yielding area, not only will your property appreciate in value over time, it will also give you a steady secondary income that you can either reinvest or save up. Plus, when it comes to retiring, you can either sell on your asset or pass it down to your children. With many property investments, you will make returns from day one.

Like the properties offered by RWinvest, there are hundreds of modern, off-plan or refurbished buy to let opportunities across the country, but you must do the research first. Property investment can be a career option if you are wise with spending and build up your portfolio. This is why so many investors choose to invest in property rather than put their savings in a pension pot. If you’re lucky enough to have a large sum of money that would otherwise sit in a low-interest savings account, investing in property means you will get returns and also have an asset to your name too.

Before taking the plunge and investing, you may want to look at the market and decide which area is best for you. Northern UK cities have been known to offer investors better rental yields and capital appreciation and properties in the UK capital, London. However, you need to feel confident and believe in the property and the area to know you’re going to succeed with your investment.

Pension Pot

Investment of any type can be seen as taking a risk, which is why many people simply choose to put their retirement funds into a pension pot. There are two main issues with this; you’re not going to make big returns so, therefore, whatever you put in you won’t get much more out, and also, you will need to think about whether putting money into a pension pot suits you financially.

Compared to owning a buy to let property, with pension pots, you don’t gain any interest (or whatever interest you do get will be minimal) which is why people choose investment rather than saving. However, if you are going to save for your pension, it is recommended you put your money into the likes of a Lifetime ISA which allows individuals between 18 to 50 to put away £4,000 (almost $5000) per year and receive £1,000 ($1250) as a bonus. It is worth noting that while this ISA is useful for getting a bonus every tax year, you can only open it until you’re 39 (despite being able to save until you’re 50).