The right answer depends on your particular situation.  If you could get tax relief on contributions to a Retirement Annuity (up to 15% of income that is not already funding a retirement product), it is generally a good idea to use that to increase your retirement provisions.  A retirement annuity will also provide you with the opportunity to diversify into non-property investments, which is a good way of increasing your investment returns while decreasing your risk. 

 

A rental property portfolio is a valid alternative as a retirement investment vehicle, but you need to consider the following: 

• You should ideally also have some retirement income from other sources that are not linked to the property market. 

• You should diversify your property portfolio over more than one property, so that you are not overly exposed to one tenant. 

• You need to have processes in place for managing your rental agreements, maintenance, etc. as your income stream is dependent on this and you may not always be able to do this yourself.

 

A good idea may be to model the two options to determine the likely income you will be able to derive in retirement from each, considering tax, costs, etc.  A registered financial planner should be able to assist you with this.