An alternative way to use your pension fund

Are you aware that there are there are alternatives to the traditional stock market-linked pension fund. By investing in a self-invested personal pension (SIPP) you can take control of your pension yourself and invest in a variety of different assets. One of course being property.

Before you decide to invest in property with your pension we would advise carrying out your own research and due diligence.

This will not be right for everyone and, as with any investment, there are risks attached, but there are also a number of potential advantages to investing in property via a SIPP as opposed to using a traditional pension fund.

We have looked at what people in the industry are considering to be some of the top reasons for investing your pension in property, obviously you must make sure this form of investment is suitable for you:

The performance of traditional pension funds is often strongly linked to that of stock markets. Unfortunately, in recent years stock markets have performed poorly and annuity rates are at historic lows. By investing your pension in property, you can avoid volatile equity markets and find an alternative source of growth and income.

Many pension funds charge significant fees for managing your investments, even when they perform poorly, thereby reducing the value of your pension pot further. And if you invested via an independent financial advisor (IFA) you may also still be paying commission to them. By taking control of your pension yourself via a SIPP, and investing it in property, you can avoid these fees and make more of your pension pot.

By investing your pension in property, not only could you achieve capital growth on your investment, you could also collect a regular income from a tenant. What’s more, if this rental income is enough for you to live off in retirement, you could potentially enjoy further capital growth from your investment even after you retire.

With annuity rates at historic lows of around 4% (meaning a pension fund of £100,000 would provide a weekly income of under £77), this traditional option for retirees is looking increasingly unattractive. What’s more, when you buy an annuity, you give up any further growth from your pension. By investing in property with a rental income on the other hand, you have the opportunity to enjoy a regular income and still grow your capital.

If you invest your pension in property you could also take out a mortgage of up to 50%, thereby boosting the investment potential of your pension pot. And by renting out the property, you could effectively get someone else to pay off the mortgage while you enjoy the potential capital growth.