UK. Property a ‘risky’ investment for retirement pots
High interest rates and low capital growth could reduce retirement property pot savings by as much as 38 per cent, research by wealth manager Netwealth has found.
While property investment has been a favoured option for boosting cash in retirement, the research found investment in additional properties or buy-to-let was usually outperformed by pensions.
Analysis of different values of property growth, compared with the average pension projected growth over 20 years, showed property investment could significant reducing retirement pot savings by as much as 38 per cent if clients are faced with higher interest rates and lower capital growth.
Netwealth said this scenario was likely in the current climate, given that UK inflation is rising at its fastest rate in 40 years (9.4 per cent) and the Bank of England’s new interest rate stands at 1.75 per cent, with further increases expected over the coming months.
The findings also showed that if property capital growth drops to 0 per cent, the gap between the financial returns that can be delivered by a property as opposed to a pension is even more startling.
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