A new report from Standard Life and analysis by wealth manager Netwealth suggest a significant shift in how younger generations are planning for retirement. While older generations have often viewed retirement planning as an “either/or” choice between a pension and a buy-to-let property, Millennials and Gen Z are increasingly seeing a “bit of both” as the ideal strategy. In fact, 56% of Millennials and 62% of Gen Z see a mix of pension and property as their main retirement assets, a stark contrast to Baby Boomers, who primarily rely on pensions alone.

While property has long been seen as a reliable way to generate retirement income, recent challenges such as soaring mortgage rates, stalled house prices, and increased stamp duty have made it a less attractive investment. This is particularly challenging for younger people trying to get on the property ladder, with over half of Gen Z currently renting or living with family.

To explore this, Netwealth compared the returns of a £50,000 pension pot and a £50,000 property investment over a 20-year period. The results were telling: the pension pot grew to £147,000, while the property investment only reached £83,000—a 77% better return for the pension.

The main reasons for the pension’s superior performance were its tax perks and the flexibility it offers. An initial £50,000 investment would have immediately gained nearly £16,700 in tax relief. For property, costs like stamp duty, maintenance, and letting agent fees significantly reduced the overall return. In a worst-case scenario with 0% capital growth, the property investment’s value could tumble dramatically.

Analysts now suggest that pensions are a more valuable and less burdensome alternative to property for retirement funding.² With recent changes, such as the abolishment of the lifetime allowance, pensions are becoming an even more “worthwhile” option for investors.