If
you don’t have an alternative to a standard
pension, your chances of a long and luxurious retirement
are pretty much scuppered. In making such a bold statement,
my intention isn’t to set pulses racing with
scaremongering, it’s simply to highlight the
fact that the value of pensions is being eroded by
time and, on the whole, people are doing very little
about it.
While
people work hard and pay hard, it’s the pension
fund managers who are getting rich on commissions
in the here and now, while those whose money it is
have to wait until they’re old and grey before
they see penny of it.
The real problem, as I see it, is that people don’t
really think about their pension until they get their
first payment. Which is after they retire (if they
are even able to retire), at which point they discover
that the security they had hoped for in their latter
years has been trounced by inflation and the rising
cost of living. Now I don’t know about you,
but that’s not a thought I relish. When I hang
up my suit and shiny shoes I want to know that I’ll
end my days in comfort.
You
might be wondering why I feel so strongly about pensions,
and the reason is a very personal one. Because I watched
my own father slave away as an employee his entire
life, blithely paying into a standard pension, only
to retire and find out that he wasn’t getting
anywhere near the amount of money he was expecting.
When he passed away, it was in penury.
Naturally, I decided that was something that wasn’t
going to happen to me. And it hasn’t, because
I looked for something to put my money into that would
give me a reasonable return in the near term –
a reliable revenue stream even while I was working
– with the upside of capital growth over the
longer term. For me the solution was investing in
bricks and mortar.
How
many people have you met who proudly told you that
they were leveraging the money in their pension to
provide them with additional income today with the
high probability of excellent capital gains in the
future? Very few, I imagine, if any. And yet still
they continue to feed the pension beast with their
hard earned money. Hoping. And waiting.
While pensions were hammered in the recent credit
crunch, it’s true that property prices took
a beating too. But which of these has had the greatest
recovery? The simple fact with property is that isn’t
enough to go around. We can’t build fast enough
to accommodate the people who need somewhere to live.
And it doesn’t take a Keynesian economist to
ascertain that, for this reason, property values will
remain relatively high and continue to rise long term.
The point is that for those who focus their attention
too heavily on the recent sub-prime price-drop, they’re
missing the bigger picture. Look at a graph plotting
house prices over the last 100 years and the ‘crash’
is put into perspective as a mere kink in a continuing
uptrend.
‘Buy land, they’re not making it any more,’
Mark Twain wrote. And he struck upon the most important
economic factor of all – supply and demand.
Which is why you’re better off putting your
money into property, something you can see and touch,
than a standard pension that rises and falls with
the fluctuations of an abstract market.
According
to HSBC, Britons will spend roughly twenty years of
their life in retirement. Yet more than half of these
future retirees are adequately prepared. Some have
no pension at all, and will have to live on whatever
paltry sum the government deigns to give them. Will
it be enough to live out their latter years in style?
I very much doubt it.
According to the same HSBC research, most people with
a pension will see it run dry in little more than
seven years. My definition of insanity? You pay into
a pot, and pay into a pot, and pay into a pot, month
in month out for all of your working life, and the
money you get back won’t last for the full length
of your retirement. This is a ticking time bomb that
only the financially savvy will be able to diffuse
if they look at real alternatives.
Those with property won’t need to worry as much
as those relying solely on a pension. Property owners
can enjoy a regular rental income, which can be adjusted
according to inflation, the cost of living and what
the market will tolerate. And if push comes to shove,
they can sell the property and live off the equity.
For those on a standard pension they will have to
settle for drawing down on an ever decreasing sum
of cash until it runs out, at which point it will
be time to turn to the government for a helping hand.
To
find out more about how Platinum Portfolio Builder
can deliver market-leading returns on a totally passive
investment opportunity call 01226 732606 or visit
our website where you will be able to request a copy
of the FREE Five Fundamental Principles of Property
Investment 2013 and also pre-register for one of the
first copies of Your Property Pension, due to hit
the bookshops and Kindle this year.
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Portfolio Builder builds and manages property
portfolios for people who want to invest in
property but who don’t have the time,
knowledge or inclination to do it themselves.
They only buy properties where a minimum discount
of 25% below an independent RICS valuation
is achieved. They have their own in-house
team of expert buyers, project managers, builders
and letting agents and so let and manage the
properties for their clients on an on-going
basis until they want to sell them and cash
in their profits.
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