Can I rely on my property to provide a pension?

[mulranno]

We do not pay into a pension scheme ( I have an old one from a job years ago) we are both 45 and are relying on our main property to fund an annuity when the time comes....property currently has £800k equity - we imagine we would buy a property somewhere for 300 outright and then spend 500 on an annuity -would this be sufficient? - or would we have a better income buying other properties to rent out and living on the income? - I have no idea about pensions - apart from belief that they are a poor investment return? thoughts

I am no expert I only know what other people have done in this situation.It all depends on the housing market .
The only really good pensions are the final salary ones gained in the Civil Service , NHS etc which pay out till you die so if you live till you are 90...
The housing market is not expected to be anything like it was in the past Also a house is only worth what you get for it. Larger properties may have to be sold to property developers (unless you are in London) as the trend is to downsize.
I am not qualified but I would buy one to live in when you retire and then another or others and live off the rental income Hard work,mind keeping them in order .See a Financial advisor re annuities

Horses for courses - if you are trying to create your lump sum for purchasing an annuity out of property than a pension company investing regular income for you, that's fine. There are tax advantages to paying into a pension which you don't necessarily get with property, and of course your annuity incme is taxable. When I was advised many years ago the rule of thumb was £100k lump sum for each £10k of annuity income you want, but I suspect this has become less favourable over the years. If you want to retire before mid 60s it would probably be a idea to have an alternative income stream to annuity - and rental income might be suitable.

I don't think that was helpful!

Another thing : if you keep property the government will just take it for your elderly care !! Mind you you may want to do this of course BTW I know lots of people in the care industry and they say that having money does not guarantee better care ...yes.. no guarantee

You can't make a decision as important as this without advice. You really do need to do some number crunching and look at how much you will have, how you want/expect to live and are you on track.

Tha sounds like loads to me. When we retire we hope to be in a property worth around £300k (based on current values) we will sell it and move into a retirement flat worth around £130k and buy a log cabin in Cornwall for around £60k. That will give us £100k plus our very small pension to live on, this seems like a lot and we will certainly be more comfortable than we are now. Hopefully we will be able to save a bit once the children are grown up.

I also think it can't purely be a number crunching exercise.

For you to move from a property where you have £800K equity to a property worth £300K, I can't help thinking you will be giving up an awful lot that you presumably enjoy in your home now - be that the location or parking or garden or being detatched, or whatever. Are you sure you'll want to lose all the things you enjoy about your home now ?
To me, homes and cars are pretty similar, your first one you are just thrilled to have and you can ignore all that is terrible about it, gradually, over years you improve and improve. There's a lot of things I've lived with that were fine "on the way up" but I'm not sure I'd choose to go back to once I'm at retiring age. I'll have got used to some home comforts by then.

Doesn't it depend a lot on how you like to live your life? An £800k house is likely to require a lot of maintenance as as you get older you won't necessarily be able to do it yourself and may have to pay for a lot of help. A £300k property is more likely to be manageable and will hopefully allow you to relax more.

I know my figures are miles apart but in percentage terms the drop isn't that different. A £300k property means gardening, a few hours a week cleaning and ongoing maintenance issues. A £130k retirement flat is much smaller but means time to catch the train into London and go to the theatre, restaurants and country walks on our doorstep, no gardening and no maintenance as we will pay a monthly fee for the upkeep of the communal areas.

I cashed in my personal pension when I was 50, as we were about to emigrate, and there was some doubt as to whether the cash part would be taxable where we were going. So, at age 50, my £50,000 got me an annuity of the princely sum of £1700pa.

Had I chosen to have it index-linked at a maximum of 5% per annum, the original income would have been reduced so much I would have to have live for 40+ years to be any better off. That's without taking into account of the loss of purchasing power caused by inflation. For the vast majority of us cpi/rpi doesn't cover the day to day increases - think of the increases in petrol, diesel, gas, electricity, rates etc Flat screen tv's and other electronic goods that are included in the calculation may have decreased in price, but they're not everyday purchases.

I would take some specialist advice. I don't think property compares to a really good pension scheme .... but if you haven't been paying into a pension, it's very late in the day to start now.

'Don't put all your eggs in one basket' would be my advice. If all your plans depend on cashing in one property there are the pitfalls mentioned in other posts. Personally, I'm trying to diversify my retirement portfolio so that it includes not just property but a pension scheme, tax-free savings, other long-term investments etc. That way if one element falls flat, the others might pick up the slack.

Do you still have a mortgage on your property, and if so, when will it be paid off and how much is outstanding?

Will be interesting to see ow the structure of annuities changes due to low interest rates and poor economic growth. Not sure they will exist as we have known them if this economy persists.

Another thought regarding your pension: do you/your dh stand to inherit a meaningful sum that could be put toward a pension?

We are in the exact same position as OP. And I wouldn't necessarily say that £800K = a mansion requiring a team of gardeners etc; our house is very average but in a favoured location.

Anyway, dh's pension forecast was and then more . It wouldn't even cover the council tax and water rates! So we only have the house, small savings and no prospect of any inheritance.

Like the OP, I wonder whether it would be a good idea to downsize now and buy two properties.