Should I put money into stocks and shares, my pension, or invest in property?

20 July 2021

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Question by Mark

I am 57 and have an inheritance to invest of £150,000. I am not paying into a pension at the moment as I have semi retired. I have £125,000 in my pension pot and have fairly substantial money in Stocks and Shares ISAs. I also have decent cash reserve to see me though. Should I put more into stocks and shares over a 10 year period, add to my pension funds, or invest in bricks and mortar with no mortgage?

Answered by Boring Money

Rainy day planning

The first thing I’d say is that, given that it sounds like you have your ‘rainy day’ covered, don’t need income and feel comfortable adopting a 10-year investment horizon, it makes sense that you’re considering ‘real assets’ such as property, shares and fixed interest. Clearly, I don’t know enough about your situation to give you advice, but it strikes me that there are three factors you might consider here.

First, diversification. If you own your own home, you already have a fair bit in UK residential property. I assume the property investment you’re considering is residential rather than commercial. If so, you’re duplicating your exposure.

Second, tax. The taxation of second properties has become less appealing, though for basic rate taxpayers it isn’t too bad. I can’t give tax advice, but furnished holidays lets are generally taxed in a more appealing way than buy-to-lets. In terms of pensions vs. ISAs it’s a close call, but in most scenarios pensions come out slightly ahead on tax-efficiency, but it really depends on specific circumstances such as timescales, tax relief received, tax paid on income taken later and so on.

Third, how you want to spend your time. A property investment is likely to be more ‘involved’ than selecting some funds in an ISA or pension, and then checking in on the portfolio every few months. You might like the idea of getting involved with managing a property, maybe even fancy doing one up, or you might see it as an unwelcome hassle and not what you imagined your semi-retirement being about.

Best of luck!

Answered by

Boring Money