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FAO the owners of a crystal ball.
Imagine you're looking at retiring in ten years time.
You are about to buy a new place to live.
Do you spend the maximum you can afford on property in the hope that it will rise in value giving you the option of downsizing at retirement and putting the cash into a pension or do you minimise your expenditure on a new home and put the extra cash into a pension fund?
Imagine you're looking at retiring in ten years time.
You are about to buy a new place to live.
Do you spend the maximum you can afford on property in the hope that it will rise in value giving you the option of downsizing at retirement and putting the cash into a pension or do you minimise your expenditure on a new home and put the extra cash into a pension fund?
In reply to Removed User:
Dunno, but having just moved, allow ~£20k per move for solicitors, EAs, the inevitibale upgrades etc in new houses. Another option would be a property fund that tracks the house price index or similar, which may work out cheaper.
Dunno, but having just moved, allow ~£20k per move for solicitors, EAs, the inevitibale upgrades etc in new houses. Another option would be a property fund that tracks the house price index or similar, which may work out cheaper.
In reply to Removed User:
No crystal ball here but my thoughts:
1. Depends how 'comfortable' you are. If you need every last penny of what you have for retirement, I would consider not going all in on property and putting some in some alternative (low risk) investments. In any case if the property market is having a crisis when you retire it might be quite a few years before you can sell the house and get your mony back, or even sell the house at all in some cases!
2. Are you referring to a company pension where the employer contributes or personal? If you get contributions maybe a pension is not a bad idea.
3. 'pension fund' means nothing really, would you be investing it in equities (eg ftse). If yes I would be careful as you approach retirement age, the theory is that equities yield a decent return in the long run but if you get caught in a downturn when you need the money then you are not in a great position. I think standard advise is to start putting bigger % to the safer investment instrument within a pension fund as you approach retirement.
At the end of the day, who knows! The reasonable thing to do would be to have a balanced portfolio and not put all your eggs in one basket.
No crystal ball here but my thoughts:
1. Depends how 'comfortable' you are. If you need every last penny of what you have for retirement, I would consider not going all in on property and putting some in some alternative (low risk) investments. In any case if the property market is having a crisis when you retire it might be quite a few years before you can sell the house and get your mony back, or even sell the house at all in some cases!
2. Are you referring to a company pension where the employer contributes or personal? If you get contributions maybe a pension is not a bad idea.
3. 'pension fund' means nothing really, would you be investing it in equities (eg ftse). If yes I would be careful as you approach retirement age, the theory is that equities yield a decent return in the long run but if you get caught in a downturn when you need the money then you are not in a great position. I think standard advise is to start putting bigger % to the safer investment instrument within a pension fund as you approach retirement.
At the end of the day, who knows! The reasonable thing to do would be to have a balanced portfolio and not put all your eggs in one basket.
In reply to Removed User:
Minimise and buy 2 properties, let them and rent a bed sit. Use the income generated from the let properties to service mortgages on more buy to lets. If you've got a nice car sell it and run a cheap car costing a few hundred. Forget any holidays for the next 10 years and use the money you save to pay into a pension fund.
Life will be tough for the next 10 years, but hell, that's only a small bit of the rest of your life, and is a small scrifice towards a good future. after 10 years you will be a millionaire and you can then enjoy your retirement, go on holidays etc etc.
If you plan properly you won't have a lot of time to holiday anyway as you will be inspecting properties, getting quotes for renovations etc, attending property auctions and generally building up and managing a growing portfolio.
I know two of my contemporaries who did just that and they are now wealthy men enjoying retirement to the full.
I wish I'd done something like that when I was 10 years short of retirement
Minimise and buy 2 properties, let them and rent a bed sit. Use the income generated from the let properties to service mortgages on more buy to lets. If you've got a nice car sell it and run a cheap car costing a few hundred. Forget any holidays for the next 10 years and use the money you save to pay into a pension fund.
Life will be tough for the next 10 years, but hell, that's only a small bit of the rest of your life, and is a small scrifice towards a good future. after 10 years you will be a millionaire and you can then enjoy your retirement, go on holidays etc etc.
If you plan properly you won't have a lot of time to holiday anyway as you will be inspecting properties, getting quotes for renovations etc, attending property auctions and generally building up and managing a growing portfolio.
I know two of my contemporaries who did just that and they are now wealthy men enjoying retirement to the full.
I wish I'd done something like that when I was 10 years short of retirement
In reply to Removed User:
Assume your marginal tax rate is 40%. Then every £0.60 you contribute to a pension is worth £1.00 since you contribute to pensions before tax (up to a maximum of £50k per year).
Now assume that after contributing to your pension you leave the funds in cash. So you're effectively earning £1/£0.60 = 1.667, over the period before you retire.
Over a 10 year period this is equivalent to 5.2% compounded.
This gives you a starting point for evaluating other options sensibly.
Assume your marginal tax rate is 40%. Then every £0.60 you contribute to a pension is worth £1.00 since you contribute to pensions before tax (up to a maximum of £50k per year).
Now assume that after contributing to your pension you leave the funds in cash. So you're effectively earning £1/£0.60 = 1.667, over the period before you retire.
Over a 10 year period this is equivalent to 5.2% compounded.
This gives you a starting point for evaluating other options sensibly.
In reply to Removed User:
Buy a smaller house than you were intending to and then use left over funds to buy a small 2up 2 down on a buy to let mortgage interest only. Let it out and every year pay a small amount off the capital. You can then choose to down size at your retirement age and still have a decent income from the buy to let property ( £200-300 a month). Or sell it.
Buy a smaller house than you were intending to and then use left over funds to buy a small 2up 2 down on a buy to let mortgage interest only. Let it out and every year pay a small amount off the capital. You can then choose to down size at your retirement age and still have a decent income from the buy to let property ( £200-300 a month). Or sell it.
In reply to SARS:
Thanks I hadn't thought of that. I'd just had in mind a question of whether an investment through a pension fund is likely to grow faster than property prices but if I add in 5% compound to the pension fund then property would have to grow at a fair rate to compete, you would hope more than 8% compound if a pension fund is going to return 3% at a minimum over ten years.
> Assume your marginal tax rate is 40%. Then every £0.60 you contribute to a pension is worth £1.00 since you contribute to pensions before tax (up to a maximum of £50k per year).
> Now assume that after contributing to your pension you leave the funds in cash. So you're effectively earning £1/£0.60 = 1.667, over the period before you retire.
> Over a 10 year period this is equivalent to 5.2% compounded.
Thanks I hadn't thought of that. I'd just had in mind a question of whether an investment through a pension fund is likely to grow faster than property prices but if I add in 5% compound to the pension fund then property would have to grow at a fair rate to compete, you would hope more than 8% compound if a pension fund is going to return 3% at a minimum over ten years.
In reply to Trangia:
Well buy to let along the lines you describe is possibly an option although I wonder whether the situation is quite so rosy now as it was a decade ago. Certainly a pal of mine is getting a return of 5% on a property he's bought to let, excluding any appreciation in the value of the property.
Well buy to let along the lines you describe is possibly an option although I wonder whether the situation is quite so rosy now as it was a decade ago. Certainly a pal of mine is getting a return of 5% on a property he's bought to let, excluding any appreciation in the value of the property.
In reply to Removed User:
My pension is a house that I let out, for 4 years it paid me 5k a year less tax and my expenditure was on average £800 per year for insurance and maintenance.
Last year though my long term Tennant moved out and it cost me 4k to put it right before I could put it back on the market plus I lost £800 in 2 months rent and had to stump up 2 months council tax whilst it was empty.
Take from this what you will, I personally don't trust pensions but letting is not the cash cow people make it out to be.
It's only viable for me because we bought the house in the early 90s for 23k and lived in it until we moved in 2008 and we're fortunate enough to not to have to sell it.
My pension is a house that I let out, for 4 years it paid me 5k a year less tax and my expenditure was on average £800 per year for insurance and maintenance.
Last year though my long term Tennant moved out and it cost me 4k to put it right before I could put it back on the market plus I lost £800 in 2 months rent and had to stump up 2 months council tax whilst it was empty.
Take from this what you will, I personally don't trust pensions but letting is not the cash cow people make it out to be.
It's only viable for me because we bought the house in the early 90s for 23k and lived in it until we moved in 2008 and we're fortunate enough to not to have to sell it.
In reply to Removed User:
I have a ' Final Salary pension'. (34 of 40 years paid up before it closed. ) The last 10 years will be an annuity based on whatever I save from now until then.
I also have my home for which I have already paid off the mortgage.
however, my eldest daughter sold her own place a few months back, and it went for 20K UNDER the valuation. Prices had not risen much whilst she had it, so little equity in it, as she bought at the top of the market, before the collapse. The middle daughter sold a flat and broke even ( maybe) after 6 years, she sold up as she could not save for a larger place, and was getting no equity ( now back with us )
I know that this is very regional, parts of the country , like areas of London, Edinburgh, Glasgow, etc buck the trend ( despite what the London centric news is saying)
So in truth, I have a leaky tent in both camps, and not confident in either.
I could plough my last 10 years salary, into property, but that looks as dodgy as an Anuity pension ( but at least I could give a house to the kids)
(You also have to take into account in Pensions, it can be decades, before you even get your own contributions back, never mind your employers.
So you need to be in rude health for a long time to get ( and enjoy) your pension, or the insurance companies will be the clear winners. )
> FAO the owners of a crystal ball.
> Imagine you're looking at retiring in ten years time.
> Don't need to imagine, I will be 65, so around then.
I have a ' Final Salary pension'. (34 of 40 years paid up before it closed. ) The last 10 years will be an annuity based on whatever I save from now until then.
I also have my home for which I have already paid off the mortgage.
however, my eldest daughter sold her own place a few months back, and it went for 20K UNDER the valuation. Prices had not risen much whilst she had it, so little equity in it, as she bought at the top of the market, before the collapse. The middle daughter sold a flat and broke even ( maybe) after 6 years, she sold up as she could not save for a larger place, and was getting no equity ( now back with us )
I know that this is very regional, parts of the country , like areas of London, Edinburgh, Glasgow, etc buck the trend ( despite what the London centric news is saying)
So in truth, I have a leaky tent in both camps, and not confident in either.
I could plough my last 10 years salary, into property, but that looks as dodgy as an Anuity pension ( but at least I could give a house to the kids)
(You also have to take into account in Pensions, it can be decades, before you even get your own contributions back, never mind your employers.
So you need to be in rude health for a long time to get ( and enjoy) your pension, or the insurance companies will be the clear winners. )
Post edited at 02:24
In reply to Trangia:
Blimey - you are one for living life to the max. I suppose eating anything that isn't value baked beans is also out?
> Minimise and buy 2 properties, let them and rent a bed sit. Use the income generated from the let properties to service mortgages on more buy to lets. If you've got a nice car sell it and run a cheap car costing a few hundred. Forget any holidays for the next 10 years and use the money you save to pay into a pension fund.
Blimey - you are one for living life to the max. I suppose eating anything that isn't value baked beans is also out?
In reply to Jim C:
It's not compulsory any longer to buy an annuity.
Just to simplify my above calculation, and to give more context, if you contribute equal amounts each year to your pension pot for the last ten years prior to retiring you will earn an average 9.25% compounded return.
How? Well the first year of contribution will earn you 5.2% as per above, however, the last year will earn you a massive 67% since you contribute £0.60 but receive £1.00 (1/0.6 = 1.67). The average of these calculations over the final ten years turns out to be around 9.25%.
So it's hard to beat maximising pension contributions this close to retirement.
It's not compulsory any longer to buy an annuity.
Just to simplify my above calculation, and to give more context, if you contribute equal amounts each year to your pension pot for the last ten years prior to retiring you will earn an average 9.25% compounded return.
How? Well the first year of contribution will earn you 5.2% as per above, however, the last year will earn you a massive 67% since you contribute £0.60 but receive £1.00 (1/0.6 = 1.67). The average of these calculations over the final ten years turns out to be around 9.25%.
So it's hard to beat maximising pension contributions this close to retirement.
Post edited at 08:51
In reply to ByEek:
Stuff baked beans. I think people neeed to save sensibly but the evidence I see is that people who live too frugally for a better life in retirement all too often get stuffed. Enjoy yourself as much as you can, as long as you can would be my advice. Given the increasing costs of healthcare I suspect anyone in the UK who has anything less than a huge nest egg, and the good lawyers and accountants that come with that, is going to have a high risk of getting fleeced to pay for any problems in their old age.
The idea its easy to become a property mulit-miliionaire from a zero base is daft, it ignores all sorts of pitfalls, huge amounts required of your spare time, and the ubiquity of taxation.
Stuff baked beans. I think people neeed to save sensibly but the evidence I see is that people who live too frugally for a better life in retirement all too often get stuffed. Enjoy yourself as much as you can, as long as you can would be my advice. Given the increasing costs of healthcare I suspect anyone in the UK who has anything less than a huge nest egg, and the good lawyers and accountants that come with that, is going to have a high risk of getting fleeced to pay for any problems in their old age.
The idea its easy to become a property mulit-miliionaire from a zero base is daft, it ignores all sorts of pitfalls, huge amounts required of your spare time, and the ubiquity of taxation.
In reply to Offwidth:
I agree to a point. But I also don't see why you should be entitled to keep your house if you have to move into a home. I know it is nice to keep the cash in the family, but someone has to pay for your care in old age. Once upon a time it would have been your family. Nothing new there.
> Stuff baked beans. I think people neeed to save sensibly but the evidence I see is that people who live too frugally for a better life in retirement all too often get stuffed. Enjoy yourself as much as you can, as long as you can would be my advice. Given the increasing costs of healthcare I suspect anyone in the UK who has anything less than a huge nest egg, and the good lawyers and accountants that come with that, is going to have a high risk of getting fleeced to pay for any problems in their old age.
I agree to a point. But I also don't see why you should be entitled to keep your house if you have to move into a home. I know it is nice to keep the cash in the family, but someone has to pay for your care in old age. Once upon a time it would have been your family. Nothing new there.
In reply to Removed User:
If you do end up downsizing and buying another property then consider doing it elsewhere - If there's a property market downturn in one area do you want both properties to be affected? I suspect anyone doing 'buy to let' now will have missed the boat that the prosperity of the ten years up until 2008 brought.
Property investment needs an exit strategy - what will you do if there's a crash? How exposed will you be?
If you do end up downsizing and buying another property then consider doing it elsewhere - If there's a property market downturn in one area do you want both properties to be affected? I suspect anyone doing 'buy to let' now will have missed the boat that the prosperity of the ten years up until 2008 brought.
Property investment needs an exit strategy - what will you do if there's a crash? How exposed will you be?
Post edited at 13:32
In reply to Removed User:
My advice would be to put the money to good use - buy a property that you will live in and will enhance your quality of life now.
I always think property is a good long-term investment, but I'm surprised that nobody has brought up the ethical considerations of fuelling the buy-to-let market.
My advice would be to put the money to good use - buy a property that you will live in and will enhance your quality of life now.
I always think property is a good long-term investment, but I'm surprised that nobody has brought up the ethical considerations of fuelling the buy-to-let market.
In reply to Dax H:
I agree with your general point that buy to let is not the cash cow that people think it is (I have a buy to let flat) but I don't think your figures here have helped the case...
£5k a year for 4 years gives an income of £20k, then you've had to spend circa £5k to sort it out when your long term tenant moved out, that's still a £15k income over 4 years, plus the property appreciation... Not knowing your initial capital investment I can't say for sure but I would be surprised if you could find another investment that paid even close to that.
The problem with investing in buy to let now is that unless you have a large amount of capital to invest (most BTL mortgages require 25% deposit) then you will only be able to afford somewhere relatively small. After service charges, ground rent, maintenance and empty periods, the rent will only give you a small income per annum. Mine, for example, gives me about £1-2k per year. Plus the property appreciation obviously. Better than a kick in the balls certainly but not enough to spend my days lounging around drinking gin.
In Reply to Chris the Tall:
I'm never sure what people mean when they talk about the 'ethical' argument about buy-to-let. There is a demand for rental property so why is it unethical to provide it? I can see an argument against Landlords who fail to maintain property etc and expect market rent but I don't see how the whole industry is 'unethical'??
I agree with your general point that buy to let is not the cash cow that people think it is (I have a buy to let flat) but I don't think your figures here have helped the case...
£5k a year for 4 years gives an income of £20k, then you've had to spend circa £5k to sort it out when your long term tenant moved out, that's still a £15k income over 4 years, plus the property appreciation... Not knowing your initial capital investment I can't say for sure but I would be surprised if you could find another investment that paid even close to that.
The problem with investing in buy to let now is that unless you have a large amount of capital to invest (most BTL mortgages require 25% deposit) then you will only be able to afford somewhere relatively small. After service charges, ground rent, maintenance and empty periods, the rent will only give you a small income per annum. Mine, for example, gives me about £1-2k per year. Plus the property appreciation obviously. Better than a kick in the balls certainly but not enough to spend my days lounging around drinking gin.
In Reply to Chris the Tall:
I'm never sure what people mean when they talk about the 'ethical' argument about buy-to-let. There is a demand for rental property so why is it unethical to provide it? I can see an argument against Landlords who fail to maintain property etc and expect market rent but I don't see how the whole industry is 'unethical'??
Post edited at 16:07
In reply to Edradour:
I wonder about that too. I also wonder if there is a correlation between those who think that the 'European' style of renting is so much better than our obsession with housing, and criticising landlords here in the UK. Who owns the properties to let in France and Germany anyway?
I wonder about that too. I also wonder if there is a correlation between those who think that the 'European' style of renting is so much better than our obsession with housing, and criticising landlords here in the UK. Who owns the properties to let in France and Germany anyway?
In reply to Edradour:
I have been very lucky in having a long term Tennant and it looks like I have found another one.
No ground rent etc either being as it's a freehold house.
Also got lucky buying when we did in the early 90 and we only paid 23k and that was for a home to live in.
These days it's a 90k house so even with a 25% deposit most if not all of the rent would go to servicing the mortgage.
I failed to highlight that with my original post.
I have been very lucky in having a long term Tennant and it looks like I have found another one.
No ground rent etc either being as it's a freehold house.
Also got lucky buying when we did in the early 90 and we only paid 23k and that was for a home to live in.
These days it's a 90k house so even with a 25% deposit most if not all of the rent would go to servicing the mortgage.
I failed to highlight that with my original post.
In reply to ByEek:
My suggestion was extreme, but the OP was asking for advice and "practical" advice isn't always that palatable! But in the scheme of things 10 years of frugal living is not really that long when you think of the benefit of living a more than comfortable retirement.
I couldn't have done it myself, although being retired now I really wish I'd done more towards making my retirement more financially comfortable when I had the chance.
As I said I know two guys who followed similar strict regimes and are now reaping the rewards. It wasn't all sack cloth and ashes, they had a lot of fun playing the property market and buying up and renovating properties, and it was so absorbing that they had little time for holidays and other luxuries, however whilst not climbers, both are keen walkers, so could take time out to relax that way, which like climbing is a lot cheaper than taking holiday trips abroad. Both ran old vans for transport and that also saved them hell of a lot on vehicle depreciation and running costs, and what costs there were were tax deductible.
Property dealing and letting is running a second career and the potential financial rewards greatly outweigh those of an average main job.
> Blimey - you are one for living life to the max. I suppose eating anything that isn't value baked beans is also out?
My suggestion was extreme, but the OP was asking for advice and "practical" advice isn't always that palatable! But in the scheme of things 10 years of frugal living is not really that long when you think of the benefit of living a more than comfortable retirement.
I couldn't have done it myself, although being retired now I really wish I'd done more towards making my retirement more financially comfortable when I had the chance.
As I said I know two guys who followed similar strict regimes and are now reaping the rewards. It wasn't all sack cloth and ashes, they had a lot of fun playing the property market and buying up and renovating properties, and it was so absorbing that they had little time for holidays and other luxuries, however whilst not climbers, both are keen walkers, so could take time out to relax that way, which like climbing is a lot cheaper than taking holiday trips abroad. Both ran old vans for transport and that also saved them hell of a lot on vehicle depreciation and running costs, and what costs there were were tax deductible.
Property dealing and letting is running a second career and the potential financial rewards greatly outweigh those of an average main job.
In reply to Edradour:
Not necessarily "unethical", but there are ethical considerations.
Is the reason why so many people are renting that they can't afford to buy, and the reason for that they have been priced out of the market by buy-to-let landlords?
OK that's capitalism for you, simple supply and demand, but the supply side is restricted (and rightly so IMHO) by the finite amount of land for building homes. And did the buy to let boom lead to the house price bubble, which lead to taxpayers having to foot the bill, as the consequence of leaving it up to true market forces (and prices returning to their pre-boom levels) was just too awful to contemplate.
Then again is the stock market more ethical - hardly
Not necessarily "unethical", but there are ethical considerations.
Is the reason why so many people are renting that they can't afford to buy, and the reason for that they have been priced out of the market by buy-to-let landlords?
OK that's capitalism for you, simple supply and demand, but the supply side is restricted (and rightly so IMHO) by the finite amount of land for building homes. And did the buy to let boom lead to the house price bubble, which lead to taxpayers having to foot the bill, as the consequence of leaving it up to true market forces (and prices returning to their pre-boom levels) was just too awful to contemplate.
Then again is the stock market more ethical - hardly
In reply to Chris the Tall:
I don't really think it's the case. If it was just a case of too many buy to let landlords then rents would fall with an increasing supply of rental properties. As it is, here in London at least, that hasn't been the case. Rents have been increasing quickly too.
So it's more a case of overall under supply of property.
> Not necessarily "unethical", but there are ethical considerations.
> Is the reason why so many people are renting that they can't afford to buy, and the reason for that they have been priced out of the market by buy-to-let landlords?
I don't really think it's the case. If it was just a case of too many buy to let landlords then rents would fall with an increasing supply of rental properties. As it is, here in London at least, that hasn't been the case. Rents have been increasing quickly too.
So it's more a case of overall under supply of property.
In reply to Removed User:
Downsize and buy another property would seem to be a good option, so you have two, if you can afford it. Alternatively save a cash pile, and spend the winter months in a developing country, and come back for our summers( thats a laugh, we don't get proper ones anymore)
Downsize and buy another property would seem to be a good option, so you have two, if you can afford it. Alternatively save a cash pile, and spend the winter months in a developing country, and come back for our summers( thats a laugh, we don't get proper ones anymore)
Post edited at 20:56
In reply to Removed User:
Ask around, find a good financial adviser local to you. Be prepared to pay for the advice.
The value of money changes though time (Eg, 3% inflation & 2% interest = savings shrink 1% PA, not grow. Now add in the benefit of pension fund contributions being out of gross income etc etc etc) - It's very complicated!
(For what it's worth I would go for the property option, I think future Governments are going to tax the f*&k out of pensioners; there won't be any other soft targets left! (& home ownership will never be a vote winning tax target))
Get some proper advice
Ask around, find a good financial adviser local to you. Be prepared to pay for the advice.
The value of money changes though time (Eg, 3% inflation & 2% interest = savings shrink 1% PA, not grow. Now add in the benefit of pension fund contributions being out of gross income etc etc etc) - It's very complicated!
(For what it's worth I would go for the property option, I think future Governments are going to tax the f*&k out of pensioners; there won't be any other soft targets left! (& home ownership will never be a vote winning tax target))
Get some proper advice
In reply to Chris the Tall:
As a landlord, I cannot remember setting the price and value of my house myself, I'd have made it a damn sight higher if I'd have known that.
How does that work then, just so I can price some more people out of the market.
> Is the reason why so many people are renting that they can't afford to buy, and the reason for that they have been priced out of the market by buy-to-let landlords?
As a landlord, I cannot remember setting the price and value of my house myself, I'd have made it a damn sight higher if I'd have known that.
How does that work then, just so I can price some more people out of the market.
In reply to Removed User:
I've always considered property to be the safest bet (especially in London). If you aren't in a rush to sell, it will (in general) always go up in value in the UK. Ok so their are crashes, but three years later and its all back up. Or buy a second flat and rent it so you have a return as well.
I've always considered property to be the safest bet (especially in London). If you aren't in a rush to sell, it will (in general) always go up in value in the UK. Ok so their are crashes, but three years later and its all back up. Or buy a second flat and rent it so you have a return as well.
In reply to Chris the Tall:
The main reason I am in the situation where I am now a landlord is not by choice. We couldn't sell our house. So had no option but to let out and move on. We had to scale back on what we bought next. But with the market the way it is, all the deals favor new builds. So the old cottage will be a rental for the foreseeable future. It's not something I want to do, but I put so much into it I'm not prepared to sell at a loss. I suspect I'm not the only person in this situation either.
The main reason I am in the situation where I am now a landlord is not by choice. We couldn't sell our house. So had no option but to let out and move on. We had to scale back on what we bought next. But with the market the way it is, all the deals favor new builds. So the old cottage will be a rental for the foreseeable future. It's not something I want to do, but I put so much into it I'm not prepared to sell at a loss. I suspect I'm not the only person in this situation either.
In reply to SARS:
( not what I'm being told)
I think, that it is that you don't now , immediately, have to take an annuity( if say the market is poor) you will have a couple of years or so take it.
> It's not compulsory any longer to buy an annuity.
> When did that happen?
I can then , at 65, take the whole pot of my And my employers contributions, and invest it myself , or stick it in my bank account ?( not what I'm being told)
I think, that it is that you don't now , immediately, have to take an annuity( if say the market is poor) you will have a couple of years or so take it.
Post edited at 23:02
In reply to Edradour:
Plus the property appreciation obviously.
I have already pointed out that you cannot take property appreciation for granted, as per my two daughter's experiences.
One had her flat 6 years, and barely got her money back after costs of selling. Virtually no appreciation. ( London may be an exception)
( and I put money into it in improvements as well, so that was lost)
Plus the property appreciation obviously.
I have already pointed out that you cannot take property appreciation for granted, as per my two daughter's experiences.
One had her flat 6 years, and barely got her money back after costs of selling. Virtually no appreciation. ( London may be an exception)
( and I put money into it in improvements as well, so that was lost)
Post edited at 23:16
In reply to crayefish:
Is this view of yours based on your own experience of buying and selling/ renting, and making actual monetary gains?
> I've always considered property to be the safest bet (especially in London). If you aren't in a rush to sell, it will (in general) always go up in value in the UK. Ok so their are crashes, but three years later and its all back up. Or buy a second flat and rent it so you have a return as well.
Is this view of yours based on your own experience of buying and selling/ renting, and making actual monetary gains?
In reply to Blizzard:
A friend said goodbye to his last child, promptly sold the large family home, bought a small flat in the UK, and a place in Turkey in prep for retirement.
All the family use the home in Turkey meantime, so it gets used, otherwise he would let it out.
Options on retirement are sell up in the UK, or let it out.
> Downsize and buy another property would seem to be a good option, so you have two, if you can afford it. Alternatively save a cash pile, and spend the winter months in a developing country, and come back for our summers( thats a laugh, we don't get proper ones anymore)
A friend said goodbye to his last child, promptly sold the large family home, bought a small flat in the UK, and a place in Turkey in prep for retirement.
All the family use the home in Turkey meantime, so it gets used, otherwise he would let it out.
Options on retirement are sell up in the UK, or let it out.
Post edited at 23:40
In reply to Jim C:
Yes, I own property that I rent out. Haven't resold for a better investment yet but will in around a year. But if I was to do it all again I'd buy garages in London as the return per capital is better (for rental) and there is less to go wrong (ie. no boiler to replace etc).
Also I know many who have done a similar route and always done well unless they sold in a rush. Though having said that, most also have money (comparatively less though) in shares, pensions funds and things like that. Always worth spreading the risk I guess.
> Is this view of yours based on your own experience of buying and selling/ renting, and making actual monetary gains?
Yes, I own property that I rent out. Haven't resold for a better investment yet but will in around a year. But if I was to do it all again I'd buy garages in London as the return per capital is better (for rental) and there is less to go wrong (ie. no boiler to replace etc).
Also I know many who have done a similar route and always done well unless they sold in a rush. Though having said that, most also have money (comparatively less though) in shares, pensions funds and things like that. Always worth spreading the risk I guess.
In reply to Edradour:
Not sure myself, but with two daughters looking to get into the market to buy, they could , in some areas, be paying more in rent than a mortgage would cost ( granted it is at risk of going up)
Paying 'high' rent compounds the problem , by then limiting their cash available to save for their deposit.
It is the large deposit that the Buy to let people CAN afford to pay, and the youngsters can't, that can seem to them to be unfair ( rather than unethical)
> In Reply to Chris the Tall:
> I'm never sure what people mean when they talk about the 'ethical' argument about buy-to-let. There is a demand for rental property so why is it unethical to provide it? I can see an argument against Landlords who fail to maintain property etc and expect market rent but I don't see how the whole industry is 'unethical'??
Not sure myself, but with two daughters looking to get into the market to buy, they could , in some areas, be paying more in rent than a mortgage would cost ( granted it is at risk of going up)
Paying 'high' rent compounds the problem , by then limiting their cash available to save for their deposit.
It is the large deposit that the Buy to let people CAN afford to pay, and the youngsters can't, that can seem to them to be unfair ( rather than unethical)
In reply to Removed User:
I'd chat to an IFA mate. Not sure what your line f work is but if you do have a union many will offer subsidised advice. Some employers do aswell. Worth asking HR!
I'd chat to an IFA mate. Not sure what your line f work is but if you do have a union many will offer subsidised advice. Some employers do aswell. Worth asking HR!
In reply to crayefish:
Thanks, good to know , snag is that it is based in that strange world called London, and does not apply, as far as I know, so much up North ,other than areas of say Edinburgh, Aberdeen .
Alas I could not hope to make any money from buying a garage near Loch Lomond.
> Yes, I own property that I rent out. Haven't resold for a better investment yet but will in around a year. But if I was to do it all again I'd buy garages in London as the return per capital is better (for rental) and there is less to go wrong (ie. no boiler to replace etc).
> Also I know many who have done a similar route and always done well unless they sold in a rush. Though having said that, most also have money (comparatively less though) in shares, pensions funds and things like that. Always worth spreading the risk I guess.
Thanks, good to know , snag is that it is based in that strange world called London, and does not apply, as far as I know, so much up North ,other than areas of say Edinburgh, Aberdeen .
Alas I could not hope to make any money from buying a garage near Loch Lomond.
Post edited at 00:48
In reply to Removed User:
Yeah for garages the return is only good in big cities with little space as everyone wants to ieep their porsche near by. Where I have my workshop (in a row of garages) there are loads used just for that reason.
But as they are so low maintenance, its easy to have one in a reasonably remote city.
Yeah for garages the return is only good in big cities with little space as everyone wants to ieep their porsche near by. Where I have my workshop (in a row of garages) there are loads used just for that reason.
But as they are so low maintenance, its easy to have one in a reasonably remote city.
In reply to Jim C:
No. You can do income drawdown, for example. This is where you drawdown an amount up to the maximum defined by the Government Actuary Department (GAD). It will be based upon prevailing interest rates and mortality rates at that time. See the following http://www.hl.co.uk/pensions/annuities/alternatives-to-annuities
However, you should definitely get professional advice before doing anything.
No. You can do income drawdown, for example. This is where you drawdown an amount up to the maximum defined by the Government Actuary Department (GAD). It will be based upon prevailing interest rates and mortality rates at that time. See the following http://www.hl.co.uk/pensions/annuities/alternatives-to-annuities
However, you should definitely get professional advice before doing anything.
In reply to Removed User:
I get the Sunday Times. Each week it's money section interviews someone (usually a semi-celebrity, such as a retired sportsman, an author, or a businessman) about their personal finances. It's a fixed interview, in that the questions are the same every week - how much cash do you carry, what credit card do you use, have you ever been hard up, best ever purchase, first home, etc. It sounds dull, but they often use the answers talk about thier life, to reminisce. One of the questions is exactly this - pension or property? I'd say 70% say property - flexiblity, safety, etc.
That said, these people are usually financially secure. By property, they mean the flat in London, the villa in Spain and the country pile. But they all seem to have done the same - buy house, buy big house, clear mortgage, build up nest egg of shares, sell shares to buy second home.
I suppose the one thing to draw from it is that you can buy ISA's etc to save with, without buying a pension scheme, and get at that cash any time.
I get the Sunday Times. Each week it's money section interviews someone (usually a semi-celebrity, such as a retired sportsman, an author, or a businessman) about their personal finances. It's a fixed interview, in that the questions are the same every week - how much cash do you carry, what credit card do you use, have you ever been hard up, best ever purchase, first home, etc. It sounds dull, but they often use the answers talk about thier life, to reminisce. One of the questions is exactly this - pension or property? I'd say 70% say property - flexiblity, safety, etc.
That said, these people are usually financially secure. By property, they mean the flat in London, the villa in Spain and the country pile. But they all seem to have done the same - buy house, buy big house, clear mortgage, build up nest egg of shares, sell shares to buy second home.
I suppose the one thing to draw from it is that you can buy ISA's etc to save with, without buying a pension scheme, and get at that cash any time.
In reply to Jim C:
This is a very valid point but the OP is asking for long term investment options. 6 years isn't really long term.
Your daughter's experience is also compounded by the fact that she bought towards the top of a property boom (2007) and sold just as things are starting to recover. If she had been in a position to hold on to the property for another 2-3 years she may well have seen a return on her investment. (I appreciate that this is often not viable).
This is perhaps the significant difference between buying property as an investment and buying it as somewhere to live. In the latter case you are under more pressure to sell if you want to move away, circumstances change etc whereas in the former, you would probably choose when to sell according to market conditions.
> Plus the property appreciation obviously.
> I have already pointed out that you cannot take property appreciation for granted, as per my two daughter's experiences.
> One had her flat 6 years, and barely got her money back after costs of selling. Virtually no appreciation. ( London may be an exception)
> ( and I put money into it in improvements as well, so that was lost)
This is a very valid point but the OP is asking for long term investment options. 6 years isn't really long term.
Your daughter's experience is also compounded by the fact that she bought towards the top of a property boom (2007) and sold just as things are starting to recover. If she had been in a position to hold on to the property for another 2-3 years she may well have seen a return on her investment. (I appreciate that this is often not viable).
This is perhaps the significant difference between buying property as an investment and buying it as somewhere to live. In the latter case you are under more pressure to sell if you want to move away, circumstances change etc whereas in the former, you would probably choose when to sell according to market conditions.
In reply to Removed User:
At the moment I would put money in a pension fund. I am a strong believer in doing the opposite of what everybody else is doing from an investment perspective.
It strikes me that alot of those who maybe retiring in 10 years time are buying housing property.So I reckon in 10/15 years time there may be a glut of properties with older investors looking to sell to fund their retirements.
Have you though of buying a commercial industrial property and then renting it out?
At the moment I would put money in a pension fund. I am a strong believer in doing the opposite of what everybody else is doing from an investment perspective.
It strikes me that alot of those who maybe retiring in 10 years time are buying housing property.So I reckon in 10/15 years time there may be a glut of properties with older investors looking to sell to fund their retirements.
Have you though of buying a commercial industrial property and then renting it out?
In reply to Removed User:
I'm not an investment advisor but work in a similar area and interact with a lot of investments advisors (from IFA's to fund managers).
There are so many ways to look at this I think you need to decide what works best practically for you. It's not as simple as what is the best financial solution and there will always be compromises and assumptions (which may well prove to be wrong).
I've always tended to look on a pension as a relatively inflexible thing, and to an extent it is. However, some fairly recent changes have made them less so. I think the starting point is that, if your employer contributes, you would be stupid not to take maximum advantage of that (eg, if it is on a matching contribution basis). Beyond that, the tax savings can be quite compelling - as pointed out higher up the thread. If you pay tax at the higher rate, you can generate an instant 40% uplift in your investment pot based on the initial tax relief alone. If you are earning in excess of £100k, your marginal rate of tax and hence tax saving can be even higher. What other relatively safe investment allows you to do that? The fund then grows free of tax (assuming the underlying investments do grow!). Of course, you are taxed on it when you withdraw your pension but there is the 25% tax free lump sum and then the rest may, in your retirement, be taxed at lower rates. Hence, it can be very tax efficient. If you are paying tax at higher rates right now, I would have thought that this would make a lot of sense.
However, the property angle is an interesting one and I know lots of people who have gone down that line. Ignoring the actual investment/commercial sense of it, there is a lot to be said for effectively forcing yourself to save by having to pay off a mortgage. With pensions and other forms of saving, you have to make a more active decision. With a property, once committed to a mortgage, there's no decision and you can't blow that money on a big holiday or whatever.
In pure investment terms, buying a second home (eg. in Wales or the Lakes) makes very little sense as the cost of running it on top of your main home is likely to erode most/all of any benefit. Unless you let it out on a genuine commercial basis.
So, either buy a more expensive main house now which you would at least use and only have one set of bills, or look at a buy to let (resi or even commercial). The rent pays off most of the mortgage and, at the end of it, you own the property. Yes, you need a deposit and there may be unlet periods but, generally, it does seem to work well.
I'm not an investment advisor but work in a similar area and interact with a lot of investments advisors (from IFA's to fund managers).
There are so many ways to look at this I think you need to decide what works best practically for you. It's not as simple as what is the best financial solution and there will always be compromises and assumptions (which may well prove to be wrong).
I've always tended to look on a pension as a relatively inflexible thing, and to an extent it is. However, some fairly recent changes have made them less so. I think the starting point is that, if your employer contributes, you would be stupid not to take maximum advantage of that (eg, if it is on a matching contribution basis). Beyond that, the tax savings can be quite compelling - as pointed out higher up the thread. If you pay tax at the higher rate, you can generate an instant 40% uplift in your investment pot based on the initial tax relief alone. If you are earning in excess of £100k, your marginal rate of tax and hence tax saving can be even higher. What other relatively safe investment allows you to do that? The fund then grows free of tax (assuming the underlying investments do grow!). Of course, you are taxed on it when you withdraw your pension but there is the 25% tax free lump sum and then the rest may, in your retirement, be taxed at lower rates. Hence, it can be very tax efficient. If you are paying tax at higher rates right now, I would have thought that this would make a lot of sense.
However, the property angle is an interesting one and I know lots of people who have gone down that line. Ignoring the actual investment/commercial sense of it, there is a lot to be said for effectively forcing yourself to save by having to pay off a mortgage. With pensions and other forms of saving, you have to make a more active decision. With a property, once committed to a mortgage, there's no decision and you can't blow that money on a big holiday or whatever.
In pure investment terms, buying a second home (eg. in Wales or the Lakes) makes very little sense as the cost of running it on top of your main home is likely to erode most/all of any benefit. Unless you let it out on a genuine commercial basis.
So, either buy a more expensive main house now which you would at least use and only have one set of bills, or look at a buy to let (resi or even commercial). The rent pays off most of the mortgage and, at the end of it, you own the property. Yes, you need a deposit and there may be unlet periods but, generally, it does seem to work well.
Post edited at 12:05
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