What role does property play in your retirement strategy? | AAG Wealth Management

What role does property play in your retirement strategy?

Posted: June 22, 2021

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News that house prices grew an average of 10.2% in the year to March is likely to have buoyed many UK home owners1.

The rise was driven in part by the Stamp Duty freeze that will begin to taper down between July and October of this year. House prices may stabilise as the freeze lifts and demand calms to a more normal level.

What does the recent rise in house prices mean for the role of your residential property in your retirement strategy? It is not uncommon to hear people think of their property as their pension, given that it is often owned for several decades with the expectation that it will grow substantially in value over that time. After all, it’s often the biggest investment people make in their lifetimes.

But planning to use your home to fund your retirement carries several risks. It only takes a slowdown in the housing market, a rise in interest rates, or a change in personal circumstances to lower the financial returns you expect from your home when you eventually sell.

It is better to view property as one source of return within a diversified portfolio. That includes diversification within the asset class of property: income-generating property funds that invest in the commercial space can help spread risk and return across the sector.

Spreading your assets across a range of wrappers (e.g. ISAs, unit trusts or pensions) is also a more tax-efficient way of using your investments when you come to retire.

St. James’s Place Partner can help you manage the tax-efficiency of your investments as you move through retirement, and help make sure you’re on track to meet your goals and objectives.

Property can be a good source of income and can form part of your retirement strategy – but to use it optimally and wisely, it’s best to receive financial advice.

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The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

1 Source: Office for National Statistics, ‘UK House Price Index: March 2021’


If you would like to discuss retirement planning with a member of the AAG team, please leave your details below.