A report issued by Standard Life has highlighted that pension funds have performed better over the longer term than residential property i.e. 25 years. Their report highlights that for the period 1977 to 2002, buy to let property delivered 10.1% pa whereas the Standard Life with profits pension delivered annualised returns of 15.6% (for a lower rate tax payer) and the equivalent for a higher rate payer was property 9.3% pa and Standard With Profits Pension 16.8% pa.
Our view
Take all marketing figures reported with a pinch of salt! The first thing to watch is the use of "buy to let" property. Buy to let is taxable, whereas investment in your own main residence is not. Add a few more % points for your own home returns.
Pension funds attract tax relief on the contribution and grow tax privileged. Knock off a few % points to allow for tax concessions. This will give you a fairer picture of the actual return.
The fact remains that property as an asset class has outperformed most other asset classes over the longer term. You can even invest in property funds inside pensions.
Did you know that your pension fund can even buy property directly and take out a mortgage?
Learn more about self invested pensions in the Pensions Adviser.com.
Registered users: Free fact sheet – Pensions Can Buy Property Too!