Investing wisely as a pensioner or investing as part of a pension?
Wherever you are in the world as a pensioner, you need to take care about your investment choices. No more so than in the UK where pension reforms have given many 55-year-olds and upwards, a chance to free up pension pots to invest as they wish and not be constrained by buying annuities.
Many pension holders may not get the appropriate advice they need to make some of these decisions, but they do need to consider very carefully a number of things, including the cost of exiting any scheme or pension plan they may have.
Clearly there are significant advantages to investing in property, when compared with other asset classes. But this will not be for everyone. Individuals should consider this in the context of their personal situation, assets and risk profile. They should seek grounded, common-sense advice from suitably qualified financial advisors and well-established, reputable estate agents.
Pensioner investing and holiday home buying
Whilst many pensioners may feel comfortable with property investment, because it is a known, tangible, entity, it is not for everyone. Buy-to-let, for example, may require more time and effort at a time when, someone scaling down work, may want to take it far more easy. Although for many, it can be liberating to earn while they sleep.
For those requiring less hassle, but who would still value additional income, there are more passive investments like hotel investing. This can give the combination of really good returns whilst letting someone else put in the effort.
Evidently, some pensioners may well want to buy a holiday home abroad, that they can use and then pass onto other family members.
Investing for a pension - role of property
Many people see their pension pots not growing at the rate they had hoped for, or expected. In this situation there may be more scope and time to invest in property in the medium term to supplement pension provision, or as part of the pension. Property has the potential, after all, to earn more through capital growth for an investor than their wages, in some instances.
SIPPs (Self-Invested Personal Pension)
There are certain investment types which can be used as part of a SIPP, notably commercial property. So this can mean hotel investments, fractional ownership or whole room ownership. These are pure investments, without personal usage given the rules governing SIPPs are stringent. It is also worth bearing in mind that, whilst commercial property can be invested in via a SIPP, it does not automatically mean all commercial property is SIPPable. Due process has to be followed so that an investment type is 'approved' under the rules and is allowed by certain SIPP providers.
Role of Buy-to-let
Buy to let has always enabled investors to start with a deposit, borrow money in the form of a mortgage, which in effect multiplies the orignal investment several fold and then benefit from capital growth on the value of the property. It is a story of leverage and the effect of multiplying gains. Much of this depends on the age and creditworthiness of the borrower or investor. Some banks are getting more lenient with their age limits for lending, so this may still be a possibility for many planning for retirement.
This still remains a positive investment route for cash buyers.
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