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Millions Still See 'property As Their Pension'

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Millions still see 'property as their pension'

Despite a beleaguered housing market and an ongoing recession, millions of Britons are still putting their retirement in jeopardy by depending solely on property to fund their retirement income, according to new research.

The fact that property prices are 16% down on last year (Halifax), has not dimmed the British population's faith in bricks and mortar, with some 16%, or an estimated 5m people, still relying on their home to fund their retirement.

The finding came in a study from the employee benefits consultancy, Foster Denovo, which found that more than a third, at 36%, of working adults in Britain still do not have a personal or company pension in place.

The survey also highlighted that more than a quarter, at 28%, of people aged between 25 to 44, do not have any provisions – such as property, inheritance or savings – in place for retirement.

And 11% of this age group confirmed that they had not yet considered how they would cope financially at the end of their working life.

Worryingly, 25% of respondents believe they will need to work to the ages of 70 to 79.

The sobering report arrives just weeks after both BP announced the closure of its lucrative final salary scheme and Barclays reported a major review of its offering, delivering yet more blows to cast-iron retirement plans.

Ian Bird, of Foster Denovo, said: 'With lower house prices, people who rely on the equity in their property may find themselves having to massively downgrade in order to have sufficient funds to support their retirement.'

A recent Royal Institution of Chartered Surveyors report showed that presently home sellers fortunate enough to find buyers are doing settling for an average of 11% below the asking price, and in some cases as much as 26% below.

The tough property market highlights the big difficulties for those planning to downsize their property as a way of paying for their retirement.

Tom McPhail, of Hargreaves Lansdown, an independent financial adviser, said: 'Relying on property to fund a pension, can and has worked in the past but it is a very high risk strategy. At the very least you should save in some sort of pension plan too.'

Land Registry figures show that a couple downsizing from a detached house, at an average price of £236,000, to a maisonette flat, at a mean of £142,000, would realise a bulk sum of £94,000 before solicitor's fees and stamp duty (although a temporary extension of the stamp duty threshold means homes under £175,000 are currently exempt.)

If this £94,000 had to fund a 20 year retirement it would generate around £6,000 a year, or £3,000 per person.

Steve Rumbles, at fund manager BlackRock, says: 'The problem is that using a property as a means to fund retirement leaves you relying on the health of the property market, which can be very cyclical.

'Also if something goes wrong with the property, both home and retirement income are affected. Faced with a depressed property value an individual either has to carry on working, or accept a much reduced income in retirement.'

Bird added: 'The lack of awareness and insight amongst consumers when it comes to pensions is a cause for extreme concern. Believing that you will work to a certain age is all very well, but it isn't always realistic. Many people find themselves unable to work in later years, usually for health-related reasons. Thinking that you can 'save later' is not always an option.'

Unless you have a gold-plated final salary scheme, if you want to achieve a comfortable income in retirement you should ideally be putting aside half your age in percentage terms. Therefore, according to life insurer Aegon, a 30-year-old who starts saving today should think about setting aside 15% of their salary. Obviously, the sooner you start saving, the more affordable it becomes and the better off you are likely to be in retirement.

What to expect? Hope for a new dawn? Or is the stubborn propensity of Britons giving the nation a virtual kick in the nads?

The problem with this financial strategy is that everybody will be downsizing as the same time.

Over abundance of supply does what again?

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Millions still see 'property as their pension'

What to expect? Hope for a new dawn? Or is the stubborn propensity of Britons giving the nation a virtual kick in the nads?

The problem with this financial strategy is that everybody will be downsizing as the same time.

Over abundance of supply does what again?

You see that, but all I see is

"Pensions company says buy pensions"

Edit to add. That wasn't meant to be a criticism of you, cim.

Edited by bobthe~

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You see that, but all I see is

"Pensions company says buy pensions"

+1

Steve Rumbles, at fund manager BlackRock, says: 'The problem is that using a property as a means to fund retirement leaves you relying on the health of the property market, which can be very cyclical.

whereas of course, stock prices only ever go up :rolleyes:

Edited by VoteWithYourFeet

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You see that, but all I see is

"Pensions company says buy pensions"

Edit to add. That wasn't meant to be a criticism of you, cim.

:lol:

So that's pensions and property out. Any other ideas? Ah not to worry as according to the times I'll almost certainly die from obesity before retirement anyway.

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>Millions still see 'property as their pension'

Funny, I see not having a property as being my pension.

I've used the savings from selling and renting (with salary sacrifice) to build up a decent pension fund.

When it comes time to buy, the property will be a home for life, not for a future downtrade. If there is any mortgage left when I retire (60?) then the 25% tax-free part of my pension could pay it off.

Buy low, sell high. It doesn't get any easier than that.

VMR.

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I'm curious as to where these muppets who are going to use property as a pension are going to live? Or do they have no dependents to pass their 'wealth' on to?

quite - this scenario does not work unless they have a very good house and are prepared to downsize a bit (I think most people will not want to move from a detached house to a studio flat) . It is only marginally feasible if they had bought an investment property before about 1999 and have substantial equity they can release on retirement. It is fools gold they are buying into. ;)

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I'm curious as to where these muppets who are going to use property as a pension are going to live? Or do they have no dependents to pass their 'wealth' on to?

I'm curious who they are going to rent to, if we all buy properties for a pension.

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One of the best ways to ensure you have a good pension is to choose a partner whose parents own their own house. When his or her parents go to meet their maker in their eighties your be approaching your sixties and will inherit their property -- the sale of which will provide a sizeable boost to your bank balance.

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You see that, but all I see is

"Pensions company says buy pensions"

Edit to add. That wasn't meant to be a criticism of you, cim.

:lol: Me too.

What I read was "If people don't keep giving their cash to thieving banksters and investment managers how will I be able to take my cut and have any prospect of a comfortable retirement of my own?"

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:lol: Me too.

What I read was "If people don't keep giving their cash to thieving banksters and investment managers how will I be able to take my cut and have any prospect of a comfortable retirement of my own?"

However, having worked in that sector for pretty much all my life, I am obviously a bit worried for my future prospects.

Of course it might have helped if I believed in what I have been doing for nearly 30 years? :lol:

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:lol:

So that's pensions and property out. Any other ideas? Ah not to worry as according to the times I'll almost certainly die from obesity before retirement anyway.

Yes - property. Build a small portfolio, do your homework and choose the correct location and the correct type of property, then work to pay it off by the time you are 55 from additional payments from you and the rental profits from your tenant.

Then enjoy a rental income and have something to pass on to your family when you are gone.

My parents do it and I saw the light and changed over from a contribution pension scheme after seeing the amount of admin costs each job change had on my pot.

But wait atleast another year (probably 2 years) to start picking up property approaching bottom.

If you are not in it for capital gain, but for monthly return, just make sure you buy near bottom to minimise your mortgage payments and get it paid down quicker.

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You can't escape the fundamental demographics, which means that the western world is going to have too many pensioners compared to workers. Whilst the opposite is true in the developing world. So unless the west comes up with a method of persuading the developing world to support the life styles of all our baby boomers, there is some nasty surprises in store for those soon to retire.

And that includes those who's "pension" is property. As these baby boomers, who own the majority of the property in the UK, either die or downsize their properties, they will be selling to a smaller generation of potential buyers. Which will inevitably lead to falling prices, especially at the family home end of the market.

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A paid for property can help towards your pension....all we need now is for them to be low enough for people to buy and eventually pay for them within their working life time.

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"Pension? No Mr. Bond, I expect me to die"

In all honesty, that's pretty much the plan. Horribly pessimistic I know, but I fully expect to peg out in my 60s anyway, so I honestly don't care either way.

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I expect to spend my retirement living with Mrs Yogi on the ground floor of our current house while letting out the upper two floors to student doctors at the nearby hospital.

At current rentals that should bring in around £1200 pm to supplement Mrs Yogi's NHS pension. I think we'll survive!

Your house can be your pension!

Cheers

George Roper-Rigsby

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I expect to spend my retirement living with Mrs Yogi on the ground floor of our current house while letting out the upper two floors to student doctors at the nearby hospital.

At current rentals that should bring in around £1200 pm to supplement Mrs Yogi's NHS pension. I think we'll survive!

Your house can be your pension!

Cheers

George Roper-Rigsby

Student doctors???

Remember The Drifters?

'C'mon over to my place

Hey girl - we're havin' a party...'

Tonight and every night....

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Yes - property. Build a small portfolio, do your homework and choose the correct location and the correct type of property, then work to pay it off by the time you are 55 from additional payments from you and the rental profits from your tenant.

Then enjoy a rental income and have something to pass on to your family when you are gone.

My parents do it and I saw the light and changed over from a contribution pension scheme after seeing the amount of admin costs each job change had on my pot.

But wait atleast another year (probably 2 years) to start picking up property approaching bottom.

If you are not in it for capital gain, but for monthly return, just make sure you buy near bottom to minimise your mortgage payments and get it paid down quicker.

are you going to be a pwoperdie miwwionaire?

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are you going to be a pwoperdie miwwionaire?

Typical of you to mock... actually if you gave it some thought it's quite a sensible thing for many to do, espeically as it avoids being stiffed by fund managers and pension firms etc.... if you buy near the bottom and focus your efforts on paying the debt off (rather than continual leverage) then its quite a reliable (at least) way of building a nest egg, and I am sure that many will think so when the market falls, and the more the market falls the greater the number that will think so.

In fact sentiment towards property as an investment "at the right price" I suspect remains not so far away from the level it was at in 2007.... rightly or wrongly.

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Typical of you to mock... actually if you gave it some thought it's quite a sensible thing for many to do, espeically as it avoids being stiffed by fund managers and pension firms etc.... if you buy near the bottom and focus your efforts on paying the debt off (rather than continual leverage) then its quite a reliable (at least) way of building a nest egg, and I am sure that many will think so when the market falls, and the more the market falls the greater the number that will think so.

In fact sentiment towards property as an investment "at the right price" I suspect remains not so far away from the level it was at in 2007.... rightly or wrongly.

Without being rude, you are talking out of your ****.

The issue with this sort of investment as a pension is that I know of no 70-80 year olds, who could be bothered being woken up at 6am with the news that their tennants have run off, having urinated in the cooker.

Extreme example? Yes!

However, you cant look at world then, through your currently (younger) eyes.

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