More than three million people, or 7%, rely on property investments to fund their retirement, according to research from Baring Asset Management.
The asset manager says the trend leaves savers dangerously exposed to interest rate movements and fluctuations in the UK property market.
A total of 10% of 35 to 44 year-olds plan to retire with the income they receive from property assets, compared with 8% of 45 to 54 year-olds and 6% of 25 to 34 year olds.
Marino Valensise, chief investment officer of Barings, urges savers to diversify their portfolios.
He says: “The UK has seen an incredible increase in wealth in the last 20 years, fuelled, in part, by rising house prices in both nominal (gross of inflation) and real (net of inflation) terms; one factor has been the easier access to borrowing.
“It is highly unlikely that, during the next decades, we would experience similar levels of property price increases, especially in real terms. The events of the summer are already beginning to feed through to the average UK consumer in the form of higher borrowing costs based on more stringent lending criteria. This is likely to have an impact on the property market.”
Marino recommends individuals take a satellite approach to pension portfolio asset allocation. He says the portfolio’s core should include assets such as global equities and inflation-linked bonds. The satellite part of the portfolio should include asset classes which would contribute enhanced investment returns from themes which are less correlated to the ‘traditional’ asset classes.
The research also shows 33%, or 15.1m people, have not made any provision for their retirement. Young people in particular do not think about their financial future as 34% of 25 to 34 year-olds do not have any kind of pension plan in place.
More than 20% of 35 to 54 year-olds have not made any provision for their retirement and 22% of over 55 year-olds have not put a pension in place.
Almost 40% of women do not have a pension, compared with 27% of men.
To comment on this story contact:
Tel: 020 7034 2679
E-mail: [email protected]
The increase in minimum AE contributions has had little impact on opt-out rates - with cessations after April increasing by less than two percentage points, data from The Pensions Regulator (TPR) shows.
Follows string of appointments
Follows acquisition of BlackRock's DC platform
‘In the know’
£116.8m of benefits received by customers