Andy Haldane, the Bank of England’s chief economist, has confirmed what many of us already knew – investing in property is a better investment for retirement than paying in to a pension.
When speaking about preparing for retirement, Haldane told the Sunday Times: “It ought to be pension but it’s almost certainly property.”
Haldane, who owns two homes – one in Surrey and a holiday home on the Kent coast – pointed to the fact that there is a chronic housing shortage across the country which continues to place upward pressure on house prices.
“As long as we continue not to build anything like as many houses in this country as we need to ... we will see what we’ve had for the better part of a generation, which is house prices relentlessly heading north.”
Investment returns from residential property - rental income and capital growth - continue to beat all other mainstream investments, including commercial property, UK government bonds, cash, while remaining a highly popular alternative to the volatility investors often risk when investing in the stock market.
Among those property experts to agree with Haldane’s view that property is a better investment than a pension, is Graham Davidson (below), managing director of Sequre Property Investment.
He said: “Poor returns, hefty fees and inconsistent annuity rates have caused the number of Britons taking out pensions to fall considerably.
“As Mr Haldane has pointed out, bricks and mortar continues to out-perform many other more volatile investments, providing stable returns with the added benefit of owning a tangible asset, unlike stocks and shares. This is particularly important for the older generation, many of whom will look to hand down their investment to family members.
“Our figures support Mr Haldane’s claims, with 46% of our investors citing investing for their pension pot as their primary motivation for choosing buy to let property, and 95% of investors purchasing with their pension in mind."
However, Ros Altmann, the former pensions minister, said Haldane’s comments were “divorced from reality” and it was “irresponsible” to suggest people should rely on property rather than pensions.
This is not the first time Haldane has raised eyebrows with his comments on pensions. In a speech in May, he admitted that he was unable to understand pensions because the system was so complicated.
“I consider myself moderately financially literate – yet I confess to not being able to make the remotest sense of pensions,” he said. “Conversations with countless experts and independent financial advisers have confirmed for me only one thing – that they have no clue either.”