Property vs pensions: what's best?

Property The government has said it's going to bring forward the second part of its Help to Buy scheme, pushing more money into the property market but does it mean that less money is going into pensions?

The Help to Buy brought into interest-free government loans up to 20% of a new build property's value for those who could scrape together a 5% deposit. It's already done a great job in boosting the market – coupled with the government's Funding for Lending Scheme, which saw it make £80 billion accessible to banks to lend out as mortgages.

The result has been rocketing house prices in London and the South East and slower gains in other parts of the country, but gains nonetheless.

The second part of the Help to Buy will see the government guarantee 15% of mortgages for those with 5% deposits. The difference is this will be available on new build and existing properties.

Critics have already said we don't need the second part of Help to Buy, that it will result in house prices increases even more quickly. So what has the government done? Brought the second part forward to, well now, instead of January.

The real concern is that while the government's guarantees will stop parents and grandparents raiding their pension savings to help their children and grandchildren on to the housing ladder, rising prices mean property will become much more preferable than pensions.

Brits love property and we don't really like pensions. If the government starts not just backing but effectively guaranteeing house prices rises, why on earth would anyone put money into a pension?

Purchasing a buy-to-let is a compelling argument at the moment but the problem is the government isn't going to guarantee house price rises forever. It's not even known if the increases we've already seen can be sustained let alone continue.

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If we see property prices crash like they did in 2007 it won't be so bad for those who have bought at the peak who are planning to sit tight but what if you retire and you're relying on a property you bought at the peak but is now worth far less to pay for your retirement?

If your house price is ticking up so is your confidence in the economy but it's too focused on the present. Property can of course be part of a retirement plan but there's a worry that a focus on the present could be catastrophic for the future.

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