I sometimes feel that we love property, especially Buy to Let, as much as we hate pensions.

I know that’s a huge generalisation, but there’s no doubt, based on regular conversations I have, that it feels true.

So, I thought we’d compare the two to try and answer the question once and for all. If you are starting to take retirement planning seriously, which should you use; a pension or Buy to Let?


Pension: If you are employed, you probably have access to a workplace pension, to which your employer will contribute. You will also get tax-relief (more of that in a moment).

For investors with a lump sum, this can also be contributed, up to a maximum of 100% of your salary, capped at £40,000. Although, with some careful planning, contributions in excess of that amount can also be made.

Buy to Let: A deposit of at least 15% of the purchase price will be required, the rest could be funded by a mortgage.

If you have a large lump sum, you could of course buy the property outright.

The winner: Pension; for most people, it’s more accessible.

Advocates of Buy to Let often cite the benefits of borrowing money and gearing. But, for us, these are not enough to beat the tax-relief and employer contributions available via a pension.

Tax: Pre-retirement

Pension: Contributions qualify for tax-relief, which effectively top up your payment. Basic-rate taxpayers can claim £20 for every £80 they contribute. Higher-rate taxpayers can claim a further £20; making the net cost of getting £100 in to your pension, just £60.

The growth on investments held in the pension is tax-efficient.

Buy to Let: The list of taxes you will have to pay soon mounts up.

Firstly, assuming you own a residential property or other Buy to Let investments you will pay the normal level of Stamp Duty, plus an extra 3%.

Secondly, the ability of landlords to offset income against mortgage interest has been curtailed.

Thirdly, any rental income is subject to tax, even if it is invested in further properties.

Next, if the property is sold, any gains will be subject to Capital Gains Tax (CGT). And finally, if the property is empty, the landlord may have to meet the council tax bill, even though they don’t live there.

The winner: Pensions, by a country mile.


None of us have a crystal ball, and trying to predict returns is like flipping a coin. However, there are some differences to consider.

Pension: A pension can invest in a wide variety of assets (including commercial property via a Self-Invested Personal Pension) such as stocks and shares, bonds, gilts and cash. That means diversification is relatively easy to achieve and a portfolio can be built to match your attitude to risk.

Buy to Let: Diversification is hard to achieve for Buy to Let investors.

Perhaps with the exception of London and the South East, the UK property market tends to move in one direction; whether that be up or down. Buy to Let investors can try to build an element of diversification into a larger portfolio by buying property that appeals to different type of tenants e.g. families, individuals, or students. But it’s hard, especially in the early days when an investor may have only one or two properties.

The winner: It’s impossible to predict returns, so let’s ignore that factor. That means we are left with diversification; a pension is the hands-down winner.

Tax: At-retirement

Pension: Up to 25% of the pension fund can be taken as a lump sum, the balance is then subject to Income Tax.
Buy to Let: All income received from Buy to Let investments is subject to Income Tax. Furthermore, if a property is sold, CGT will be due on any amounts above the allowance, currently £11,300. That amount is doubled if you own the property jointly.

The winner: The ability to take 25% of the pension as a tax-free lump sum gives it the edge. In fact, overall, pensions are far more tax-efficient than Buy to Let investments, which now benefit from virtually no tax breaks.


Every investment attracts fees and charges. Carefully managing these, and keeping them to a minimum which still delivers value for money, is hugely important.

Pension: There can be three sets of costs or charges to invest in a pension. These are made by the pension provider, fund manager and financial adviser (if you take advice). The range of these charges can be huge, from relatively modest, offering excellent value for money, to extortionate. As an aside, we work hard to reduce all costs for our clients, especially those associated with the investment management itself.

Buy to Let: Equally, there are charges and costs associated with property investing. From those when you buy the property, such as legal fees, Stamp Duty and the cost of any upgrading. To fees and costs while you own the property, including letting agents, insurance, maintenance, and, probably, mortgage interest. The costs of running the property will also have to be met during void periods.

Finally, if you decide to sell you will pay legal fees and may need to pay an estate agent.

The winner: No result; it’s impossible to say without being able to look more deeply into a specific set of circumstances and carefully compare the costs.

The ‘hassle’ factor

Pension: In its simplest form, a pension can be very easy to open and manage. This is especially true with workplace pensions. An Independent Financial Adviser, such as ourselves, can help you make some of the tougher decisions. Alternatively, you can invest your own time and make the decisions for yourself.

Buy to Let: Property investing is more akin to running a business than it is an investment. Even a single Buy to Let investment (which will bring with it problems of diversification) needs careful management.

The winner: Investing in a pension shouldn’t be a ‘hands off’ task. But there’s certainly less hassle than owning a Buy to Let property or portfolio. For us, a pension is the winner.

The overall winner?

For us, it’s pensions.

Sure, Buy to Let, and indeed other options such as Individual Savings Accounts (ISAs), may play a part, especially for people affected by the Annual or Lifetime Allowance. But for employees, the ability to join a workplace pension, which means contributions are made by your employer, plus the tax advantages, renewed flexibility and the fact they are (generally) less hassle, make pensions the clear winner.

If you would like to talk to us about building a plan to secure your financial future and ensure a comfortable retirement, we would be very happy to hear from you.

Call us on 0113 262 1242 or complete our online enquiry form by clicking here.