Pensions Problems Getting Worse

Rod Thomas The pension problem is growing and can't be ignored. Governments have progressively tinkered with the system and the end result has been that the ability of people to both preserve their capital and grow a pension that will deliver the income they want has been severely compromised.

Current figures show that 2.3m people live below the poverty line in old age and that number is rising!

The start of the Government attack on pensions was in 1997 when Gordon Brown abolished the dividend tax credit clawing back £5bn a year from pensions.

Even earlier than that Margaret Thatcher introduced a tax on surpluses on occupational pension schemes. That prompted many companies to take long 'contribution holidays' and has directly led to the huge deficits that face many pension schemes today!

Capital growth property pension

A new survey from Aviva shows that 70% of people are resigned to having to work beyond their normal retirement date.

All in all, it's pretty depressing. If you work for yourself, then even putting anything aside for your pension could have been a struggle.

The end result is that more and more of the 'would-be' property investors I talk to are people in their late 40's and 50's who are now seriously worried about their potential pension and trying (correctly in my view) to use property to make up the potential shortfall.

Here's the big question. Say you have 10 years to retirement. Is it possible to build a good income in 10 years from property, without having a huge capital sum to play with?

As a general answer, the good news ( NO: the Great News!) is that you CAN produce a good income in the next 10 years from property. However, what it will look like is going to depend on:

How much capital you have available now
What's your current credit status, income and property ownership
What you call a 'good' income
What's your attitude to risk
And more...

It's difficult to be specific in a blog article! If you have at least £25,000 available in cash, then ask for a free strategy session with myself or David Ball to discuss the options available and see what will work for you. Telephone the office on 01273 447 300 to arrange.

Property investment pension

However, if you are trying to work out for yourself what to do with property, here's some ideas and thoughts to get started with:

You are incredibly lucky with timing. In the UK and USA we are about at the bottom of the property cycle, so your 10 year time span is going to take us pretty close to the top of the next cycle. Your situation would be far more difficult if we were not at this point in the market cycle!
If you have limited capital... then the best approach is in two parts. Spend 10 years building capital as fast as possible, then change your investment strategy and turn your investments into high yielding property for cash flow. This may require selling existing property and buying other property in 10 years time. Bear that in mind when you structure your investments now.
Be willing to look outside the UK. Axis has investment opportunities in the USA that are likely to provide far higher growth prospects over the next 3-5 years than the UK.
Leverage is important. Gaining maximum borrowing will enable you to massively increase your ROI for whatever level of capital you have available now. We can set you up (subject to status) with a £1m commercial borrowing facility and the ability to invest with No Money Down. That can make an enormous difference to your ROI and growth of capital!
Be flexible about location even within the UK. Whilst prime London property is at the top of many investors wish list, it won't provide the maximum growth or income. It's a very safe investment - but if you are intent on building the biggest possible capital reserve in the next 10 years then you probably need to take a little more risk.

What are you planning to do for your pension? Are these ideas helpful? Let me have your comments below.

Live with Abundance

Rod Thomas sig