How to increase the value of your pension by 100% every 5 years through overseas property
We caught up with Gareth Bertrum from John Charles Personal Finance to try to understand a bit more about investing in property with your pension.
RM: Hi Gareth, firstly, can you give us an overview of exactly why people should think about what their pension is doing right now and why they should think about what it would provide them in the future? GB: Research shows that only a handful of people with old pension funds see then as having any value at all. In fact most people with old pensions worth less than £100,000 see them as being a complete waste of time and have given up on believing they are going to give them the retirement they would like. Here’s the reason why; current income after taking your tax free lump sum from a pension worth £100,000 is roughly £86 per week!
RM: So for arguments sake, we have £100k in an old pension that we’re not doing a lot with until we retire. Firstly, is £100k actually enough to buy an overseas property and if so, how is investing in property going to help us generate a higher return?
GB: The simplicity behind it is that rather than using your cash in the bank to act as your deposit you can use your pension instead. When you combine the pension with a mortgage this gives you the chance to buy a property. Not only can this make valuable use of your old pension but it also means you get to keep your cash in the bank at a time when most people would prefer to have a safety net.
The graph below shows how a £100,000 was used to buy property rather than being left in the stock market. Your pension fund can then borrow money in the form of a mortgage so the value of the investment owned can be up to 50% greater immediately. A tenant then pays the mortgage off for you whilst the value of the property can go up over time.
When the mortgage is paid off, you could suddenly be getting hundreds of pounds per week in rental income rather than that measly £86.
RM: It all sounds very good, but what if people don’t actually know the current value of their pension? GB: If you’re not sure about the value of your pension just get in touch and we can find out the value for you free of charge.
RM: You mentioned something about a tenant before, how exactly does that work? GB: So think about it, rather than having to pay into your pension to increase its value or put it in a high risk investment – you get a tenant to pay rent into your pension and effectively a third party is making the contributions to your pension for you. When you reach retirement you can then start to take the rent out as income. If you sell the property then the benefits are further enhanced by potential increases in the capital value of the property too.
RM: Why would investing my pension in property be safer than leaving it where it is and gambling on the stock market? GB: Property has always stood the test of time but the same can’t be said of the stock market as your last pension statement will tell you… Most pension funds are tied up in the stock market and with daily news reports about the wavering economy and your own pension statements telling you the value is not even keeping up with inflation why would you want your retirement fund invested there? Well it’s there because you’ve possibly never known or been told any different.
RM: We’ve talked about a superficial £100,000 pension to invest with so is that the minimum? GB: Not at all. Deposits for investment properties start from only £30,000 so this opportunity of buying property with your pension is open to the vast majority of people.
RM: So what are the first steps, how do we find more information about the process and whether we are eligible? GB: The starting point is to find out the value of your current pension and we can now arrange this free of charge for you. Simply submit us an enquiry through our online form and we’ll be in touch to discuss whether we can work with you.
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