Viewpoint: Pensions now a real worry

Aug 1 2007 by marketing director of Property First Asset Management, Matt Staines

JUST 20 or so years ago we lived in a world where 30-year-olds didn’t think about their pensions. Retirement was a long way off and, after all, the state would take care of them, wouldn’t it?

But now that all those 30-somethings are 50-somethings, retirement is not only a much more real prospect, for many it’s also a real worry. Yes the state will provide, but how much and for how much longer? All those big fat pension funds are now the stuff of legend.

For many 30, 40 and 50-somethings the golden hope has been buy-to-let investment, but the sad fact is that there simply aren’t enough tenants for all those swanky city centre apartments.

Thanks to the increasing army of smaller investors that have realised all this, there is a growing shift away from independent buy-to-let investment towards commercial property.

The advantages add up very quickly. For a start, while residential properties are typically rented out in six-month chunks, a commercial lease ties the tenants in for years at a time, reducing the risk of your property standing empty – and what’s more, the demand is there.

For the smaller investor who doesn’t have £200,000 to spend on an apartment, let alone a few million to splash out on an office block, funds or syndicates are the ideal approach.

So how do you do that without getting involved with the big players? The first thing to do is get advice from experts.

Secondly, make it tax-efficient. A Sipp investment in commercial property is not liable to either capital gains tax or inheritance tax – that’s why around 80% of our investors hold their investment in a Sipp.

Finally, keep an open mind about your investment. It may not be 100% commercial – indeed, the planners are ensuring that more and more developments are mixed use. The key is getting in early on the right opportunity.

There are some in the property world who resent the “amateur” investor getting into commercial property, but why shouldn’t opportunities be open to all? Whether young or old, those who take advantage of this new approach to securing a future may soon be heralded as pioneers.