There is now greater flexibility in the pensions industry and gone are the days when pensions were exclusively managed by Fund Managers with little connection to those providing the investment funds. Pensions reform has enabled many individuals to take the reins and actively manage investments that form part of their pension fund. There are many investment products that enable individuals to manage investments in shares and investment bonds but it is also possible to invest in businesses and properties as part of a pension provision.
Commercial investments are increasingly popular amongst the business community as it is possible for a pension fund to own a property and for rent to be paid from a business into an expanding pension fund portfolio. This provides an income for the pension fund and creates a tax-deductible expense for the business. Therefore business taxes can be reduced at the same time as building a sizeable pension fund. Property has long been seen as a solid alternative investment because the long-term rate of return has been very consistent.
The advance in travel all over the world means that hotel investment is often seen as a great way to build a pension portfolio. A well run hotel located in an area where buildings are at a premium such as central London can not only generate good rates of return but can deliver growth in the value of a property simultaneously. Pension funds are being used as vehicles for investment because they are tax efficient, especially for those seeking to avoid the top rate of taxation on their income.
The stock market is no longer seen as the default route for investors and the relaxation of rules governing what assets can be included in a pension scheme has resulted in a boom in pension fund activity. This diversification is only likely to continue as funds seek alternative ways to boost the retirement income of their investors.