Buy to Let Is Performing Worse than Pension Savings: Report

New research from the Telegraph suggests that buy-to-let has performed worse than pension contributions when it comes to planning for retirement.

Someone investing £100,000 in BtL in 2005 would be £83,000 worse off after ten years than someone who invested the same money in an aggressive pension scheme.

The Telegraph reckons the initial £100k would have grown to around £235k by 2015; compared to only £152k if invested in buy-to-let.

But What about Rental Income?
Can the rental income earned from letting the property during those ten years make up the difference in asset value? Apparently not, according to the report.

Taxes on rental income, plus repair costs and voids all add up. And then, of course, is the interest paid on your BtL mortgage.

Landlords who don’t use OpenRent will also lose around £1,200 a year on agency fees!

Capital Gains Tax (CGT)
Finally, there is Capital Gains Tax. If you want to access the value of your property asset, you will have to sell the property and that means paying CGT. You will have to pay 28% on the increase of value of the property over the ten years.

The whole report can be found here (behind a paywall).

But is it really that straightforward?

The report makes some interesting points, but we think property has some great strengths.

Firstly, as @Steve1 has said below, retiring is about living on a passive income. And receiving a regular rental income could be preferable to drawing from a pension with, e.g., an annuity. Fixed annuities have a defined monthly value, whereas rents can increase with or even above the rate of inflation. And if you change your mind, you can always sell the property. It’s much harder to change your annuity back into a lump sum.

Remember, too, that the shares that pension funds invest in may have performed well over the report’s ten year period, but there’s no guarantee that they will continue to outperform property over the next ten years.

And of course, there is no one, unified property market. It is a very fragment scene, with prices in some areas rising much faster than others. If you have invested cleverly, then your BtL could be doing much better than the average.

Have you invested in Buy to Let? Are you relying on it for your retirement?
Reply to this post with your thoughts!

Property for me I started years ago . You then control it yourself despite goverment interference I have done ok

1 Like

Asset values go up and down and comparisons like these depend on just where you choose the start and end points. If you were lucky to get in the market in a trough and sell at its peak then lucky you.

All of that misses the point however, to retire successfully what matters is creating an income stream that covers your outgoings. Btl provides an automatic income stream in the form of rental income, plus if you’re retired and a basic rate tax payer you’re missing the mortgage income relief issues. To create an equivalent income stream from a pension you either need an annuity or to invest the capital and live off the dividends. You can expect something like 4% return from a share portfolio and less from an annuity, so you need a bigger pot to generate the same income (assuming you manage you btl yield upwards by leveraging mortgages you might be 8-10% from rental yield.

So the comparison is less clear than the simplistic one reported, which is all about how long it will take you to exhaust the capital you’ve amassed. What you need to retire is to live off your income for as long as possible and gradually liquidate your assets. Here is where btl gives you an added bonus since you get an annual cgt allowance of about 12k each year, so if you’re lucky enough to have both pension and btl sales you can enjoy about 40k tax free each year if you liquidate slowly.

Put all that in the mix and property/btl is a tough investment to beat.


When you pass the properties on to your chlildren then you get Nothing.!!! But for me thiis is what it is about


Research and propaganda, Firstly what I have found is that with any claim of the search results there should be an absolute transparent research analogy summary detailing exactly how the research was conducted where and when and all the details about such as just believing someone without doing the research is usually some kind of propaganda.
I looked into some of these researchers and they were completely on fair and realistic and clearly not good enough to have concluded anything from.
I have seen such reports before and when I have dug very deep I discover it was based upon checking 50 landlords in Scotland or something ridiculous and the more I have researched researchers I have concluded that the majority or should I say it is normal to deceive by means of propaganda so I would be extremely careful for anyone reading too far into this without analysing exactly how the research was conducted in every detail before you start reading and commenting or Believing some newspaper article

1 Like

I have invested 93k in2 BTL’s and return 10k PA pretax,(mortgage free)should be returning 12K on retirement, try getting that from a 100k annuity.
2.5 k is the going rate.
Plus I can sell up and blow the cash if I want to.


totally agree. Its an asset that usually increases in value. You look after it yourself. So no idiot can reduce your investment (except yourself). Takes a bit of getting into the regs but life is like that…I bought one place (commercial) about 35 years ago and every 3 years I get my money back in rent. I am sure some of the older landlords will have better or similar stories

1 Like

A really interesting discussion. For what it’s worth, my wife and I were persuaded by an old fellow – who had been a successful financial journalist – that long term financial security means not having all your eggs in one basket. He advised having at least three baskets. Property and Rental Income + Pension contributions + a conservative share portfolio + if you want, a little punt in riskier investments. At any one time, one of these will get ahead of the others, and you can adjust the proportions to a degree. But, if planning for retirement, he suggested that it is probably wiser not to be too greedy.


Try calculating your true ROI (return on investment). Last time I did that I was into the 100’s of annual % gain.
This is where you calculate your true investment as the actual amount of cash you put in, not the property value. Mortgage interest is paid out of rents along with all your other expenses, so is not a consideration in the capital investment figure. You also need to factor in the first years ROI, wherein you may have forced appreciation on your property value if you have improved or converted a property.
Yes, you may have the property equity tied up in it, but that is including appreciation forced or natural, which you did not outlay / directly invest.
There is no other investment fund that will provide ROI anywhere near property, particularly if you use the power of leverage.
Read Russ Whitney’s “Building Wealth”, it gives detailed breakdowns of his property calculations in very simple / well explained examples.

1 Like