Property v Pensions, a Continuing Feature

Over the years, I have written a number of articles comparing property to standard pensions. Here I am defining “standard pensions” as being the sort where you usually invest via your company and the money is taken off somewhere to be invested by an anonymous fund manager (unless you are one of the supposedly lucky people (debate that!) to have a final salary pension).

If you read the personal finance parts of the mainstream newspapers, you will occasionally come across articles where they also compare investing directly in residential property (buy to let and variants) with investing in a more standard pension.

They will inevitably look at the tax and other factors, such as the general “hassle factors” and often conclude that a standard pension is better because it has less risk.

That’s hardly a surprising conclusion because the same newspapers are part funded by the adverts of the big fund managers – the likes of Fidelity, Aegeon etc. As I always say, “In Business, Follow the Money” and “Who is Paying the Piper?”.

Of course, you could say that I am potentially a bit biased too – but in his case towards property being better – because I have a book about it and a consultancy where I advise people to be better at it.

I understand this concern.

But I must tell you that both my wife and I have also both invested quite heavily in company pensions too, back when we were both middle management “wage slaves” working for banks and insurance companies.

We were both very attracted by the tax breaks available saving into pensions – the ability to offset pension contributions at one’s highest tax rate against one’s income, meant that every £60 you put in was effectively bumped up to £100 by the government. And we also liked to spread our investments so they they are not just “all in property”.

Property is MY Pension

So, yes, residential property is my main “pension”, but I also have some more “standard” pensions too. And I’m therefore able to assess the performance and outcome of both, especially now I’m nearing retirement age.

And I can tell you that investing in residential property since 1986 has yielded far higher returns than my investments in my pensions.

How much? I don’t know, I have never worked it out. But I know it is multiple times better. I’d hazard a guess that each £ invested in my properties has yielded between 5 and 10 times more than my pensions have done.

But that shouldn’t surprise anyone. After all, as I say in the opening chapter of both my books for landlords, “Try asking your bank for a loan to buy shares and you’ll get kicked out. Try asking for a loan to buy property and you should be asked to take a seat.”

Would such great returns be possible for someone starting off today?

Well, that is hard to say. Obviously, the tax regime has changed, so that alters things, but I am still sure that better returns are available for people investing in residential property than in standard pensions, providing they know what they are doing. Reading my first book, “Successful Property Letting” will be enough for anyone to get started and be successful.

Do I wish I had not bothered with pensions at all, despite that lovely tax deductability?

Actually, yes. I would have made more in property.

But, like anyone, I was risk averse – and property investment back then in the mid 1980s, was a new thing, squinting into the sunlight of new found freedoms (after years of dumb rent controls and restrictions on the ability to remove bad tenants).

So, there we are!

Today, as me and my wife are both nearing retirement and able to soon claim on our standard pensions, I have to say there are some extreme annoyances that we have encountered with the various pensions we hold.

If I had known of such annoyances I would not have put a penny into pensions, I would not have bothered with pensions at all.

Pensions – Complex Options Not Clearly Explained and Huge Delays On Our Complaint

For one pension, with Bank A, my wife has both an AVC account and the standard company pension. For this Bank A pension, recently, she received a letter from Willis Towers Watson, who administer the scheme, setting out her options at retirement.

I have to say, it was utterly confusing. I have a degree in economics and an MBA in Finance from a top business school and I can safely say that I am completely baffled by what her options are. I cannot make head nor tail of what they have sent her. God help lesser financial minds.

For another pension, with Bank B, it is even worse.

Over three years ago, the same idiot administrators, Willis Towers Watson, sent my wife a leaflet on her pension options. This told her that she had just a month to decide what to do with her pension. It is our view that the leaflet message was that the default option was that she could, over the 5 year period until retirement age, gradually run down her investments in equities and move them into bonds. That is the clear message she got from the leaflet.

But to our horror we than found out that the administrators had sold out half her pension from equities into bonds on one single day four years ago.

So we launched a complaint that the leaflet was misleading in that it never made clear that this could happen. This was three years ago.

This complaint is still ongoing. Her Bank, Bank B, has been continually late in replying to her complaint at every stage. Willis Towers Watson have also failed to reply in time too. Now, after going through the whole complaint process at Bank B, it is finally with the Pensions Ombudsman, where it sat for 6 months before they even looked at it!

The Pensions Ombudsman has no service standards. Also, Willis Towers Watson and Bank B’s trustees have failed to reply in time to the Pensions Ombudsman. But there are no sanctions for any of these delays. The system is a complete joke and the pension holder is collateral damage.

For all the pensions my wife has and for all of mine, it is very hard to find out how the individual underlying pension funds have performed against their relevant benchmarks. Usually, this information is not included in the packs that are sent or is hidden away on websites, which I always find odd, because it is standard information on the report of every single investment trust that I hold.

Why the difference? Why the opaqueness?

So, there it is – for my money, pensions have been a waste of time. I would have made more money putting all my money into property.

And to make things worse, we have been let down by pension fund trustees and the pension fund administrators.

Willis Towers Watson should be sacked from running both schemes – their service is appalling. They are part of a huge multi million pound group and their service is simply not good enough.

Finally, we have been let down by the Pensions Ombudsman. It is pathetic.

Let me know if you have had similar bad experiences with pensions, especially if your experiences are similar to ours, and in particular if your experiences involve Willis Towers Watson.

Also, I would urge you to have a read of my past archive pieces where I have looked at Property v Pensions.

In the coming weeks, this blog will be updating you on the Stamp Duty Land Tax (SDLT) changes for England and the new money announced in the budget for better insulation etc. Also, I will update on the new electrical regulations that mandate five-yearly inspections on all existing tenancies with effect from April 2021 and with effect from July 2020 for all new tenancies.


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One comment

  • Hi David, on the pension ombudsman case you have: in my work we have helped several people who have been given bad advice on pensions and they often make it very hard for consumers to get anywhere easily with their complaints. One thing over the years many people have been advised to do is take their money out of empoyers schemes and put the funds into a private pension. This has almost always been bad for the customer because they no longer get their employers additional contributions. Hope they get back to you with a clear outcome on your wife’s pension. Sounds like they were hedging their own bets and making sure they were covered by taking her holdings out of equities and sticking everything in bonds.

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