It’s a well-known fact that bricks and mortar is one of the safest, most lucrative ways to invest your money. Whether you’re buying a property to manage and let out to tenants for a long-term monthly income, or perhaps you’re more straightforwardly buying a second home, fixing it up and then selling it on with the aim of making some money back on your investment, the property market has always been there for anybody looking to invest without having to turn to the alien world of the financial markets.
The Problem with Property
The problem is, to be able to buy that second home, you’re going to have to be able to afford the second mortgage that comes with it. This is a challenge to begin with unless you have thousands of Pounds saved up, but it has become even more problematic in current times due to the number of foreign investors who have turned their attention to the UK’s first-time buyer housing market, driving up mortgage prices.
So, the question is, is bricks and mortar the only option for those of us who are looking to invest in something reliable, safe and productive, that will allow us to enjoy our golden years. We all know that a state pension simply isn’t enough to enjoy yourself on, so ho can we supplement this when the property market – our go to market – has too high of a barrier to entry.
Private Versus Self-Invested Personal Pensions
If you work, it’s likely that your company offers a pension scheme that automatically places money into your personal pension, but the sad fact is that these pension schemes are unlikely to accrue much interest on their own. In addition to this point, personal pensions are extremely limited in terms of the options that they facilitate. For example, you can only draw an agreed amount from your personal pension fund each month on a certain date – there’s no real flexibility.
In contrast, a self-invested personal pension (otherwise known as SIPP) available from providers like James Hay can be drawn from whenever you like, and at the amount you’re looking to withdraw. With a SIPP, then, you could save enough to purchase that second mortgage after all, whereas with a personal pension fund, this is unacceptable.
So ultimately, a SIPP could be a solution to the problem of the inflated mortgage prices we are seeing up and down the UK. Therefore, investment in a SIPP could be a wise decision.