pensions potential
It has been almost impossible to open a newspaper for the past year without
finding at least one feature on the UK property market. The pundits in the press
fill column inches with their view on whichever statistic has emerged in the
previous week; that residential prices are starting to rise in some regions, perhaps,
or that the floor has dropped out of the buy-to-let market elsewhere.
There is of course nothing new in the way that moved to recovery when assessed on its Com-
unexceptional facts are given a spin to make posite Leading Indicators (CLI).
more readable copy. It is only when you get to That view is reasonable, based on evidence
the end of the piece that you realise that it in various sectors of the UK economy. The
contains no understanding of the true poten- advisers to the Salvus Property Fund launched
tial of the property market as an investment at the end of October believe that the time is
medium capable of generating a sustainable right for investment in asset classes which
income stream and impressive growth in as- will benefit most significantly from that sen-
set values. timent. Their view is that Prime Residential
Property, in its broadest sense, is one com- Property is one such asset class that will ben-
ponent of the complete economic mix. efit from the improvement in economic con-
Changes in the economic fortunes of a nation ditions. How far is that reasonable, however?
are reflected in the performance of its prop-
erty market. The UK economy has now
reached the point in its present long term cycle
Pensions funding
where conditions have ceased to deteriorate. Given the level of underfunding in the pen-
Having reached the bottom of the curve in sions arena today, the importance of property
graphical terms, there are ‘green shoots’ ap- and its ability to deliver strong returns cannot be
pearing, which mark an economy coming out underestimated as making a serious contribu-
of recession. tion to addressing any shortfall in funding.
The fact that the FTSE 100 increased by
Economy on road to recovery
48% in the period between a low point in March
2009 and a short term peak near the end of
There is a growing body of wisdom which sup- October 2009 should not be taken as a sign
ports the view that the economy is returning that equities, and equity-based funds, will be
to forward gear. Despite the Treasury figures the engine room of growth for investors.
released during October 2009, which showed With a current yield of just uner 3.5% across
that the UK economy was still contracting at the FTSE 100 on 30 October 2009, equities
the time on the basis of a single criterion, other still offer a much higher yield than savings in
observers were more positive. the short term, but remain comparatively risky
The OECD, for example, had reported only and will not generate the kind of double-digit
days earlier than the Treasury that the UK had return needed consistently if investors are to
Equities remain a comparatively risky investment and will not generate the kind of double-digit return
needed consistently if investors are to amass tax-relieved wealth in qualifying pension pots.
The Informed Executive
53
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