3 Compelling Reasons To Use Pension Release To Invest In Overseas Property
“There’s nowt as secure as bricks and mortar” the saying goes. But is it?
Over the long term, property prices do generally rise. History reveals that providing you buy your property carefully, whether in the UK or around the world, property can be a good hedge against inflation. Get it right, and the true value of the money you invest in property will be worth more in real terms in the future. And that makes property a good long term investment.
Guess what! A pension is a long term investment too.
Many pension funds invest in property, typically commercial property. That’s because property provides two bites of the cherry when it comes to investment returns.
- The capital value will increase, if property prices rise.
- Your property can generate income, through renting it out.
There are two primary ways to fund your overseas property purchase
You can borrow money. And you can use your saving or investments. Whether you go for one or other method, or a combination of both depends largely on the cost.
If you can raise a loan or mortgage at a competitive interest rate, borrowing is a great solution. There’s no doubt that using a overseas mortgage specialist is the best way to achieve the most attractive deal.
But if you have a lump sum available for your overseas property purchase, you should check out the rate of growth you’re enjoying on your current investment. You see, if you’re able to earn a higher return on your money by re-investing in a property abroad, it would make good sense to use it towards your purchase.
You might be surprised to learn how poorly pensions been doing
In recent years, the average pension fund has grown by just 3% to 5%. That includes any income earned from the funds in which your money is invested. For income cannot be drawn while you’re growing your pension fund. It has to be reinvested to create the largest pot, ready for when you want to draw your retirement income.
Set against that backdrop, there are three compelling reasons why you should consider pension release for your overseas property investment.
1. Capital Growth
Following the credit crunch of 2008, which continues to affect economies today and will continue to do so for some time into the future, the value of some overseas property is now considerably lower than it was in the past. People around the world are desperate to sell their second homes and that gives rise to some fantastic bargains. The prospect for capital appreciation over the medium to long term is significant, and arguably better than the growth you might achieve within your current pension fund.
2. Rental Income
Buying one of more homes abroad will give you the opportunity to generate an income through rent. Whilst you could just spend the money on a higher standard of living, a more prudent use of this income would be to reinvest it back into your pension fund, to build it more quickly to provide you with a higher income when you stop work.
3. Cost Effective Holidays
If you own property overseas, your accommodation costs may be significantly reduced if you choose to stay in your own home. Sipping a long, cool drink by your sun-kissed swimming pool is a particularly satisfying and financially attractive benefit you simply cannot enjoy if you leave your money in a pension fund!
Overseas property purchase through pension release can be very rewarding.
However, you shouldn’t see this as an automatic decision. That’s because you might have the right to benefit from some valuable guarantees or other features within your pension schemes, that you’d lose if you draw out tax free cash through pension release. So as part of your financial review of the way to purchase your overseas property, you should examine all your pension funds with an independent pension specialist, to see whether it’s a good idea to release some tax free cash from your pension.
Complete the form above to see how much tax free cash you could get using pension release.
If you’re an overseas property agent or overseas property developer, you could do more business by helping your clients release cash from their pensions »