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Thread: Pensions

  1. #21
    Wammer
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    Its easy to knock pensions. But, don't forget you get at least 20% given to you by the government on each contribution. Show me another investment that will do this.

    Yes, you can't take it out till your 55 but you knew this (50) when you started. You get 25% at the end tax free.

    People have unrealistic expectations. You can't expect to out 50 a month away and retire on an income from it of 2k per month.

    Get good advice (tricky) and that would help.

    Some funds have performed badly but others have performed very well. Transferring can cost a few percent but you could soon make this up. I've doubled the value of my pension through being in some good funds.

    Don't confuse annuities with pensions, they are different things. You don't have to buy a traditional annuity. If you use drawdown your pension can pass to family after your death. Prudential also do a good with profits annuity.

    A mix of pension savings and ISAs are a good idea. You can research charges and funds yourself.

  2. #22
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    Quote Originally Posted by KevinF View Post
    Acting on paid-for advice, I have not contributed to my pension for the last three years, instead piling what spare cash we have into a stocks and shares ISA. No relief at the entry - if you will forgive the term - but no tax on the exit. Swings and roundabouts. Oh, and a lot more freedom about what one can do with the resulting pot.

    Personally, I would not trust an insurer with my pension fund in a million years now. Mine was built up with Equitable Life (and then raped), then moved to Norwich Union who killed it some more by being fecking useless fund managers. It is now parked as a SIPP, spread over some 14 different and best-performing funds and doing much better thank you, even though I have not contributed for three years (see above) and the Mrs Merkel re-election campaign has taken the shine off of it somewhat.

    I am not an IFA and anyone intrigued by the foregoing needs to seek the advice of a responsible adult.
    Good post. Agreed re Insurers. Its ok to use them to do the admin side of pensions, but use the funds of the investment houses. I have a SIPP. I was an IFA but now work as a Solicitor. I was extremely straight with my clients which stopped me being more successful. People don't like to hear the truth and fail to take good advice. I hope not to buy an annuity.

    There are some good bargains out there at the moment re investments, and the discounts may get even better.

  3. #23
    Wammer ultrawomble's Avatar
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    This article in the Guardian today makes grim reading:

    Want a 20,000 pension? You'll have to put aside a quarter of your salary

  4. #24
    Wammer oldfogey's Avatar
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    Cloth Ears, there are various tax issues with a buy to let property that varies with the individual's position. SIPP (self invested personal pensions) or stocks and shares ISAs are better tax structures for most people.

    The important issue is you need to save a meaningful amount over a long period to obtain a decent retirement income, around 15% of income for thirty years.
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  5. #25
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    You could always keep climbing the housing ladder, especially London. At the age you want to retire at downsize and sell the place to fund your retirement and move to a cheaper part of the country. No fees from the tax man as they will have all been your main residence.
    "He who increases knowledge increases sorrow" Live in ignorance and be happy.

  6. #26
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    Rental income taxable at 40%, mortgage repayments not tax deductable.

  7. #27
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    Quote Originally Posted by Cloth-Ears View Post
    I disagree.

  8. #28
    Repugnant Tosser unclepuncle's Avatar
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    Whats a pension?
    Master of prescience

  9. #29
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    Quote Originally Posted by unclepuncle View Post
    Whats a pension?
    These days, just another way of paying tax.
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  10. #30
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    Quote Originally Posted by Cloth-Ears View Post
    Surely the 40% applies just as it would apply to any income, IF you reach that level of income. They are surely not going to arbitarily slap a 40 % tax on rental income profits regardless of the individuals wider income circumstances ! Can anyone verify this please ?

    I did hear about the dissalowing of mortgage interest as a deductable expense, but at the end of the day even if that is so, fundamentally it's a good thing for the reasons I stated.
    Also Capital Gains Tax is payable when eventually you sell.

  11. #31
    Wammer oldfogey's Avatar
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    Quote Originally Posted by johnniebaby View Post
    Also Capital Gains Tax is payable when eventually you sell.
    Exactly. Income from stocks and shares in an ISA or pension is tax free, as is capital gains. A portfolio of decently-yielding shares in either tax shelter should produce a better income than a buy-to-let, and with better capital prospects.
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  12. #32
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    The income tax and CGT free only applies to your main residence, not 2nd or holiday home.
    "He who increases knowledge increases sorrow" Live in ignorance and be happy.

  13. #33
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    BtL is good but if it is all your shit in one kitty litter so to speak, remember that there are risks associated with less than 100% occupancy which can be critical if your mortgage payments continue once you have retiresd. Of course the timing of the next houising boom/bust bubble is also key. Worth keeping in mind.

  14. #34
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    Do you also realise that BTL mortgage interest rates are considerably higher than personal mortgages? Also what about bad tenants? If someone moves in pays no rent, trashes the place, and refuses to leave. It tales months and months to evict someone.

  15. #35
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    Quote Originally Posted by Cloth-Ears View Post
    Surely the 40% applies just as it would apply to any income, IF you reach that level of income. They are surely not going to arbitarily slap a 40 % tax on rental income profits regardless of the individuals wider income circumstances ! Can anyone verify this please ?

    I did hear about the dissalowing of mortgage interest as a deductable expense, but at the end of the day even if that is so, fundamentally it's a good thing for the reasons I stated.
    They take your rental income and deduct all costs of maintaining the property and the residual is added to your other income and taxed accordingly - in other words the 'profit' (your income) from a property is calculated in exactly the same way as any other business. You cannot deduct capital mortgage repayments, but you can claim the interest payments on the mortgage.
    When you sell the property, you pay CGT unless it was originally your main residence and you only pay CGT if you have rented it for more than 3 years.

    Gordon Brown opened the door to chip away at the incomes from rented property and it is becoming less attractive as an income investment - but it is still a good bet for lump sum return when you sell it.

  16. #36
    Entropy magnet baltika_no_9's Avatar
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    Quote Originally Posted by mikehit View Post
    They take your rental income and deduct all costs of maintaining the property and the residual is added to your other income and taxed accordingly - in other words the 'profit' (your income) from a property is calculated in exactly the same way as any other business. You cannot deduct capital mortgage repayments, but you can claim the interest payments on the mortgage.
    When you sell the property, you pay CGT unless it was originally your main residence and you only pay CGT if you have rented it for more than 3 years.

    Gordon Brown opened the door to chip away at the incomes from rented property and it is becoming less attractive as an income investment - but it is still a good bet for lump sum return when you sell it.
    Even if it was your main residence you are still liable for CGT if it is no longer so. You can buy a house, live in it then buy another which is your new main residence and hence subject to PRR rather than CGT, should you then sell the first place you are liable for CGT.
    Last edited by baltika_no_9; 29-05-2012 at 09:18 AM.
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  17. #37
    Wammer oldfogey's Avatar
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    You're making the assumption that interest rate costs on the money you borrow will be lower than the rental yield after maintenance costs. That's not a safe assumption for most properties and most buy-to-let mortgages. Also, UK residential house prices are still one of the world's most extended asset classes (a bubble that has not yet burst). Putting your home, your lump sum savings and borrowing to gear up on this market is a big risk.
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  18. #38
    Wammer mikehit's Avatar
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    a bubble that has not yet burst
    I find it hard to imagine it ever will. If every BTL was put on the market there is such demand that within one season prices will be back where they were. After the last housing crash the market recovered within a couple of years - admittedly that was when the banks were still lending silly money but it shows the resilience of the housing market.
    I think you are correct with regards buying property and rely on the rental income for daily living but even now I would bet that land/property is one of the surest long-term bets. If you had 20 grand to spare as a long term investment would you rather by shares or buy land/property?

  19. #39
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    My approach is simple: state will provide for me when I retire, only need enough to get some nice food at M&S each week, will run up bills during cold winters and go to court if I can't pay, but will agree with judge to pay it back at 1 a week rather than a pensioner going to jail. When times are really tough, Wigwam can have whip round and send me some money.

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