Blog / Landlords | 12 Mins Read

Should I Invest in Pension or Property in Peterborough?

Name: Should I Invest in Pension or Property in Peterborough?
Brand: Progressive Lets
Rating: 4.9 (499 reviews)

By Wayne Beecham | Created on 3rd November 2025

Should you invest your money in a pension or property? For years, a pension was the automatic choice, but property has become a popular option.

At the time of writing, Zoopla predicts average rental yields of around 6.5% in Peterborough, 6.6% in Boston, and 6.3% in Northampton. These 2025 estimates are no guarantee of future performance, but they do indicate how local rental demand and relatively low buy-in prices can be attractive to buy-to-let investors.

Does that mean you choose property over pension? Each has the potential for capital growth, but money matters are never simple – read on to understand the pros and cons.

Property Investment Or Pension Fund In 2025 – How Do They Perform?

What is the difference in the performance of pension vs property over time? For decades now investing in property has gained a reputation for earning more money for people over the long term, while pensions hold a reputation for stability.

Pension Performance

When we discuss pension stability, it’s important to note that they can fluctuate and no investment is guaranteed to increase. During the period 2012 to 2020, there were years where pension growth competed closely with the rise in house price values. However, their value dropped by 13% globally in 2022 due to political upheaval.

PensionBee’s Performance Benchmark analysis indicated that leading pension providers are delivering growth of close to 8% for people who are 30 years from retirement.

Inflation is an important factor to consider when assessing the ‘real value’ of pensions.

The UK government is yet to meet its inflation target of 2% and the current rate is 3.8%. Higher inflation rates mean that even if pensions are growing, the real value can decrease due to higher costs of living.

There are safeguards in place to protect pension schemes, though take note of their limitations. With high-profile company bankruptcies, a collapsing pension fund may attract government intervention, and your pension investments are typically covered by the FSCS up to a £85,000 cap.

You can also make your own pension investment go further. Investors can benefit from tax relief on contributions, and employer contributions which add to your pension pot.

What Pension Schemes Are There?

In addition to the state pension, other types of pensions include workplace pensions and personal pensions.

All employers are required to enrol their employees into a workplace pension scheme.

There are two types of workplace and personal pensions:

Defined contribution schemes – These are the most common and both the employer and employee make pension contributions. Employees can choose their defined contribution amount, and the employer has a set percentage that they add, which is typically around 3%. Your retirement income will be based on the overall contributions and how the investments perform. With this type of pension you can choose to take up to a 25% lump sum.
Defined benefit schemes – With a defined benefit pension, the amount you receive is related to your salary and length of time you have been paying into the scheme. This type of pension provides a guaranteed income for life.

Property Performance

Recent changes have made it harder to generate big profits from buy-to-let, namely the 5% Stamp Duty surcharge on additional properties and the loss of landlord mortgage interest tax relief. It has been replaced with a 20% tax credit, which hits higher bracket taxpayers hardest.

There are some suggestions that the UK government could introduce National Insurance on rental income as well as potential further stamp duty changes that could impact landlords.

Some landlords are concerned about upcoming changes in the pipeline with the Renters’ Rights Bill. Changes include limiting rent increases to once per year and ensuring they compare fairly to the local rental property market. However, the majority of good landlords will already be handling rent increases this way.

While stamp duty changes have affected the costs of residential property purchases, the UK’s housing market is traditionally strong, and property investors can benefit from monthly rental income as well as capital growth.

Where the UK rental market is concerned, demand from renters continues to outstrip supply.

Rents inflation has seen a slowdown but ONS figures from September 2025 showed an annual average rent increase of 5.8% in England. In Peterborough average private rents increased by 6.3% over the 12 months up to August 2025.

Selling prices for detached properties in Peterborough increased by 1.1% last year.

Longer term, the average detached house costing £66,000 in 1995 is now worth over £335,520 in the area. So, as a long-term investment, property remains a strong performing investment despite tax changes.

However, financial performance isn’t the only measure of a good investment. Read on for the pros and cons of investing in property or pensions.

What Are Your Property Investment Options?

There are several options for investing in property, including:

Buy-to-let

This is the more straightforward property investment strategy, where you purchase a residential property and rent it to one tenant or family. If you use a letting agent to manage the property, you won’t require any experience to get started with buy-to-let investments.

HMOs

Investing in a House in Multiple Occupation (HMO) allows landlords to optimise rental income as multiple tenants are paying monthly rent. However, there are lots of requirements under licensing conditions that landlords will need to meet. If applying for a mortgage for an HMO, the lender may only approve applications for experienced landlords.

Commercial Property

Another option is to invest in property that is rented out to businesses. This often provides higher returns than residential property and long leases provide more stability in terms of tenant turnover.

Hands-off Investment Funds

If you want to have minimal involvement in managing your property investment, a hands-off investment fund could a more suitable option. You invest in property through an investment company, and you won’t have to deal with work such as finding tenants and other time-consuming tasks.

Investing In Buy-To-Let Property

Buy-to-let investments can offer greater control and buying power, yet the tax implications can reduce your rental income. Read on to examine the pros and cons of property investments version pensions.

Property Investment – Pros And Cons

Pros of property investment

Potential for capital growth. Long-term growth in property values has traditionally been good, even if it’s more variable in the short term.
Regular rental income. You will receive monthly rental income to pay off your mortgage, cover running costs and hopefully provide income.
Control and choice. If you want to move abroad or invest in something else then you can sell the property and take the equity.
Borrowing ability. You can borrow money to make your buy-to-let investment, allowing you to buy a property worth far more than your deposit amount.
Insurance. You can take out insurance to cover risks such as rent loss of damage to the property.

Cons of property investment

Buy-in costs. You need a higher buy-in to invest in buy-to-let property to cover the deposit and initial setup costs.
Active involvement. Property is a hands-on investment involving reference checking, marketing, looking after tenants and arranging repairs. Management services can take on everyday tasks for an average 10-14% of your rental income, but you still need to cover basic administration.
Additional costs. As a buy-to-let investor, you have to pay higher rates of Stamp Duty and cover costs including agents’ fees, gas safety inspections and maintenance.
Income tax implications. You must declare your income from property on your Self-Assessment tax form and tax changes mean landlords can no longer deduct mortgage interest.
Less liquidity. Selling your property to release money takes time and effort and might incur Capital Gains Tax (CGT) of 20% when selling a property. Property worth more than £325,000 is also commonly subject to inheritance tax.
Selective licensing. Many local authorities have introduced selective licensing, making HMOs more difficult to establish.
Market fluctuation. There is always a chance that your property investment could go down in value or fall into negative equity.

Investing In A Pension

Pensions are traditionally the stable investment option and they’re tax efficient, but there are rules and limitations too. For example, it’s possible to access a pension from the age of 55 (set to rise to 57), though lump sum withdrawals are limited to 25%. These are the pros and cons to consider before making your pension investment.

Pension – Pros And Cons

Pros of pensions

Earlier access versus state pension. You can usually access a percentage of you workplace pension at 55, rising 57 in 2028.
Tax efficiency. Pensions are very tax efficient – the government tops up contributions and if you have a company pension then so will your employer.
Liquidity. Pensions are liquid and easy to access.
Reputation for stability. Pensions tend to make stable investments in the long run, and you rarely get less money out than you paid in.
Inheritance. Beneficiaries don’t usually have to pay inheritance tax on a pension, and it’s often easy to distribute among dependents. But check the terms of your policy carefully, as rules and guarantee periods can vary.

Cons of pensions

Strict timescale. Unlike property investments, you must wait to access your pension equity until you are at least 55 years old.
Pension rules. Pension rules may change over time to become less attractive.
Differences between pensions. Some pensions are more profitable than others, so one investment could perform better or worse than equivalent contributions made with a different plan.
Lack of control. With a company pension you have no say in where the money is invested.
Compensation limit. If the company pension provider goes bust, you can claim compensation from the FSCS but there is an £85,000 limit.
Pension pot next steps. Taking all your money out your pension pot in one go means you’ll have to reinvest some of it to make the money last.
Income tax implications. If your pension income exceeds your tax allowance, you pay income tax.

What To Consider Before Investing In Property

Make sure you’re a good match for property investing by weighing up your personal experience, the level of involvement you’re looking for, and how much you can afford to invest.

Financially, remember that when it comes to pension vs property, there is no absolute guarantee on returns. But whether you decide to invest your hard-earned cash to a pension or property investment, it can be worth spreading the investment into two, three or even four different streams. This way, you’re not reliant on the success of one single investment.

When investing in property that could mean having several buy-to-let houses or apartments. Alternatively, this could mean investing in both a company pension and a private pension. You can, of course, do both by having a private or company pension and investing in property via a REIT (Real Estate Investment Trust).

What Kind Of Property Should I Invest In (Instead Of a Pension)?

Look for areas with good rental yields and seek out safer investment choices that may require less toil. For example, properties close to local amenities and good schools, particularly with great public transport links, are attractive to tenants. Newer buildings typically require less maintenance and fewer upgrades to meet health, safety and Minimum Energy Efficiency Standards (MEES). Certain postcodes in the Peterborough area are currently generating good rental yields. This means property investors may well be able to find a good investment, though these figures can change over time.

Talk to local estate agents to find out about management services, which can reduce the workload involved in the day-to-day running of a rental property. Perhaps you’re undecided or maybe you’ve made up your mind. In either case, it’s best to discuss your situation in detail with an independent financial adviser.

Whether you settle on a pension or property, it’s usually better to invest in something than nothing. Your money is certainly not going to earn you much interest sitting in the bank or worse, stored away under your mattress.

Property & Pension FAQs

Can I combine investing in property and contributing to a pension at the same time?

Yes, many people contribute to pensions while investing in property as this can help balance out risks and provides different income streams.

How do inheritance tax rules differ for property assets vs pension assets?

Currently, property assets are subject to inheritance tax of 40% but there are tax-free thresholds depending on the relationship of the beneficiary. For example, married couples have a £1million combined tax-free threshold. Pensions are not classed as part of your estate and are not subject to inheritance tax. However, defined contribution pensions will be subject to inheritance tax from 6 April 2027.

How does inflation affect returns in property vs pension investments?

Inflation affects both property returns and pensions, as your real returns have to be adjusted to reflect the higher cost of essentials like groceries and fuel. However, higher inflation can help to boost property values and rents.

How do tax reliefs differ between pension contributions and property investment expenses?

The key difference is that pension tax relief adds to your investment upfront, whereas property tax relief reduces your tax bill when it is due for payment.

Is it better to pay off a mortgage on a buy-to-let or invest the surplus into pensions?

This depends on how your mortgage interest rate compares to your pension growth rate.

What happens if I die—how do my beneficiaries access pension funds vs property?

As pensions do not go through probate, they can be easily passed to your nominated beneficiary. Passing property onto beneficiaries usually takes longer to go through the probate process and is more complicated.

Pension or property – do you know which is best?

If you are considering a buy-to-let investment, contact the team at Progressive Lets. We can help you find a property that meets your requirements in the Spalding, Cambridgeshire and Wisbech areas.

*Disclaimer: this article is for informational purposes only and in no way constitutes financial advice. Always speak to an experienced financial advisor before making an investment decision.*

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Wayne Beecham

Wayne is East Midland’s answer to property management. His hard work and high standards of service have gained him a fierce reputation within the regional lettings market. He knows what it takes to own and manage a profitable portfolio himself, because he is not only a successful investor and landlord, but co-founder and “hands on” managing director of Progressive Lets.

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