In the UK, many people see bricks and mortar as a relatively low-risk way to save for the future. Indeed, research reported by This is Money reveals that nearly half of adults have more confidence in property than pensions as a long-term investment.
Moreover, a study by Standard Life found that a third of Gen Z (those born between 1997 and 2012) expect property to fund their retirement rather than a pension.
However, while property might seem like a “safe” and appealing investment, it’s important to consider the potential drawbacks of relying on it to fund your retirement. You might also benefit from exploring alternative sources of income, such as pensions and investing in the stock market.
Keep reading to find out more.
5 key risks of investing in property for your retirement
Property is a tangible asset which might feel more reassuring than putting your money in something you can’t see and touch, such as stocks and shares. It could also offer capital growth over time as well as a regular rental income.
However, there are some potential drawbacks of property as a retirement investment, including:
1. Low liquidity
Property generally takes time to sell. According to Zoopla, in January 2025, the average home took over six months to sell. As such, if you need access to cash during your retirement – for example, for medical or care costs – it could take a while to free up the equity in your property.
2. Capital risk
If you need to sell your property to release some funds during your retirement, you might not be able to wait until the market is favourable. This could mean that you don’t receive as much money as expected, or you may be forced to sell at a loss.
3. Unreliable income
The current rental market in the UK is strong, but the income you receive from investment properties is not guaranteed. If supply outstrips demand and the market cools, you might have gaps between tenants when your property isn’t generating an income. Also, average rental incomes could fall, meaning that you receive less each month than you calculated when planning for retirement.
4. Lack of diversification
A property requires a significant investment. Government figures show that the average house price in the UK in September 2025 is £272,000, rising to £556,000 in London. Putting so much money in a single asset could expose you to a higher level of risk than if you spread this wealth across different types of investments.
Indeed, if you invest a large portion of your retirement wealth in property and prices fall or local rental demand weakens, this could make it difficult to maintain your lifestyle and achieve your goals.
5. Tax implications
Over recent years, buy-to-let investors have faced several tax changes that have increased their costs and reduced their income, for example, the introduction of the 3% Stamp Duty surcharge on second homes and the removal of mortgage interest relief.
Additionally, in her recent Autumn Budget, Chancellor Rachel Reeves announced that from April 2027, the rate of tax on property income will increase by 2 percentage points across all tax bands to 22%, 42% and 47%, respectively.
As such, the tax implications of investing in property could erode its profitability and diminish its value as a tool for funding your retirement.
Now that you’re aware of the potential risks of investing in property for your retirement, you might be interested to learn about some alternative ways to build a sustainable income.
Pensions offer a tax-efficient way to grow your retirement wealth
If your current retirement plan focuses solely on property investments, it might be worth redirecting some of your income to your pension.
Pensions offer a tax-efficient way to build retirement wealth, as you’ll receive tax relief on your pension contributions until you turn 75.
The amount of relief you’re entitled to depends on the rate of Income Tax you pay. If you’re a basic-rate taxpayer, you’ll receive 20% relief on eligible earnings. This means that a £100 contribution only “costs” you £80.
If you’re a higher- or additional-rate taxpayer, you could claim an additional 20% or 25% respectively either by submitting a self-assessment tax return or contacting HMRC directly. As such, you could benefit from 40% or 45% tax relief in total.
In addition to this tax relief, the money you pay into your pension is invested, and any growth on your savings within the fund is generally free of tax.
However, it’s important to note that in 2025/26, the amount you can contribute to your pension tax-efficiently is limited to whichever is lower of:
- 100% of your earnings in a tax year
- The Annual Allowance, which is £60,000 for most people in 2025/26.
Your Annual Allowance may be lower if your income exceeds certain thresholds or you have already flexibly accessed your pension.
Stock market investments offer high liquidity and the potential for strong long-term returns
A survey commissioned by Brown Shipley found that 35% of affluent UK adults attribute their wealth to investing in the stock market rather than property.
If you think that buying stocks and shares is “too risky”, you might be reassured to know that analysis by Business Insider shows the S&P 500 (considered a good indicator of the market overall) has gained 10.5% annually since its introduction in 1957.
Of course, past performance does not guarantee future results, and the value of investments can go up and down. However, long-term investing could allow you to ride out any periods of volatility. It may also offer the potential for high returns, thanks to the powerful effect of compounding – earning returns on returns.
Moreover, if you need access to your invested wealth – unlike with property investments – you can quickly and easily sell your shares.
Read more: Property v stocks: Which is the better investment for you?
We can help you build a diversified investment portfolio that supports your retirement goals
There’s no need to pick between property, stock market investments, and pensions. In fact, diversifying your retirement savings and investments could help you balance risk in your portfolio and build a strategy that meets your specific needs.
If you need help reviewing your pensions, or you’re not sure how to get started investing in stocks and shares, we can help.
To find out more, please get in touch.
Email helpme@aspirellp.co.uk or call 0117 9303510.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pensions Regulator.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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