Personal pension investment and retirement planning has evolved rapidly over the last couple of decades. Fewer people enjoy the guaranteed income that comes with a final salary pension, and you now have to wait for longer to qualify for the state pension. In short, having plenty of money in retirement is on your shoulders, so the more prepared you are, the better your retirement will be.
It can be a boring subject for some. However, the end goal is to make you richer in retirement, which should provide a major incentive to be proactive. With most people dreaming of cruising the Caribbean and driving home on the golf course, with the extra bonus of time and money to spend on grandchildren, it is important to build the financial cushion that will fund it all.
However, a study conducted by the Peoples Pension, has worryingly exposed that many savers are not adequately informed about their pensions, and many are on track to run out of pension steam by the time they reach retirement!
The introduction of The Pension Freedoms in 2015 was a game changer for the pensions investment industry, and has given savers from the age of 55 the choice to do what they wanted with their pension pots. Previously, most would opt to buy an ‘annuity’, which provides a guaranteed income for the rest of the retirees life. However a shift has occurred in recent years, with many people now choosing to keep their pension money invested and draw down an income. Financial experts recommend withdrawing no more than 4 percent of the total pension pot per year. The strength and success of this strategy is very much dependent on the savers ability to invest their funds efficiently and to not draw down too much, as pots can deplete rapidly. Data from HMRC shows that savers withdrew £2.4bn from their pots between July and September last year, an increase of 21% year-on-year. So how can you ensure you use your pension pot efficiently?
Property has been historically represented as good investment for many people. And with savings accounts currently offering little by way of returns, some people are instead pumping their money into bricks and mortar. There are currently 2.7 million buy-to-let landlords in the UK, and 29% of people voted property as the safest way to save for retirement. Property investment offers a safe and secure way of supplementing pension income in retirement and complementing pension holdings, without having to rely on pension draw downs.
Establishing a property portfolio enables savers and investors to plan for retirement by providing a ‘passive income’. This dual income supplements your regular monthly wage ensuring you can save.This regular monthly income will rise with inflation, and there is a strong possibility of capital gains as house prices continue to rise providing a mulit-step process that evolves over time.
Can I invest my pension in Property?
The bricks and mortar approach to investment has proven increasingly popular in recent years. Managing pension savings and buy to let holdings can create a dynamic combination and provide a comfortable retirement, the sandy beaches and golf course greens are within easy reach. However, this is a reality acknowledged all too late for some. ‘The Pension Freedoms’ has given many the opportunity to acquire investment property by withdrawing lump sums from their pension pot. There are some drawbacks to this. Firstly, only the first 25% can be extracted tax free, the rest is liable to be taxed. Secondly, there is also a question of timing, a misunderstanding of the time horizons of a buy-to-let mortgage has forced many into a capital intensive move and buy ‘cash’, as savers can only withdraw from their pension pot after the age of 55.
Legacy Capital offers a number of unique payment plans depending on your personal pension investment plan. One of these is the option for clients to build a deposit during the construction of the property through a monthly payment structure. By not requiring an initial lump sum, saving towards a deposit can be done in a structured way that clients find comfortable and stress free. We provide a pension investment strategy allowing you to enjoy some of the best pension investment returns and save you all the other demands that come with property ownership. Our in house portfolio property management provides you with a hands off, fully managed service, ensuring your retirement is happy and stress free.
Starting to think about your retirement, and having a long term plan is crucial. The burden of retirement planning is falling on individuals now more than ever. A financially secure pension plan will allow you to enjoy a stress free retirement, and enable you the freedom to do the things you have always wanted to do. But this isn’t about babysitting grandchildren, that yearly cruise or golden golf years. It’s about how we can help you get there.
To explore your personal pension investment options Contact us today.