Rental incomes from residential properties are not keeping pace with rising property prices. Back in the good old days of 2001 many landlords were achieving rental income equal to 10 per cent of the purchase price of the property. This has fallen to around 6 per cent.

This means that, unless you choose your property very carefully, it’s very difficult to make money out of your investment. The reckoning is that the yield from the property needs to be 6 per cent of the price paid to be a paying proposition so everything is on a very tight margin.

Buy-to-let as an alternative pension plan may not be as good a move as it has been in the past. Certainly there are considerable gains to be made where investors entered the market a few years ago but, historically, houses have not been as good an investment as commercial property or shares.

According to data from the Halifax, a residential property worth £100,000 back in 1983 has risen to £555,000 in 23 years. If the property had been commercial, then its worth would have been £997,000. The outstanding winner would have been an investment in a FTSE all share tracker fund. If you’d invested the same £100,000 re-investing the dividends then the value would have been £1.4m.

Rental income from the residential property should be considered in the equation, but shares still come out a firm winner.

Looking at the situation over a shorter term, things are very different. Since 1996, residential property has beaten the share market hands down. By almost 30 per cent, in fact. House prices are now double what they were five years ago, whilst the return on your shares would only have been 11 per cent.

Rental income should not be the only consideration when weighing up the buy-to-let versus the traditional pension choice.

The generous tax relief of 22 per cent (40 per cent for higher taxpayers) on pension contributions should not be ignored. This means every £100 in your pension pot has only cost you £78 (£60 for higher taxpayers). 25 per cent of your fund can be taken as tax-free cash.

As far as residential property letting is concerned, any cash realized will be taxed at 40 per cent, less your personal capital gains allowance and any inflation indexation. Being a landlord can be something of a hassle and certainly holding a pension is comparatively trouble-free. However, you don’t have to purchase an annuity with your buy-to-let profits. It’s all a matter of trying to assess the pros and cons.

It’s obvious that you need to consider carefully which type of investment is right for you. Clearly over the longer term, the share option was the correct way to go, but who is to say what the future will hold?

By diversifying your investments, hopefully you can hope to achieve some sort of balance. Cash, shares and property were the old maxims.

There’s plenty of financial advice around. Do make sure you weigh it up, for a worry-free retirement.