Pensions

[KevinF]

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.

[clap]

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.

[clap]

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.

[ultrawomble]

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

[Cloth-Ears]

Two ideas :

- Do a buy-to-let and for a mortgage duration to be debt free by 60, or capable of being paid off early to be free by 60. Nice cash cow in retirement.

- Take your state pension at 60 by making a pretend pension between 60 and 66 i.e. build up a wee pot of £35-40 K, then from 60 release it to yourself as if receiving the state pension for those six years.


Between those two things and an occupational pension, that should make a pretty decent income post 60. Plus there's shoplifting and embezzlement from church associations to consider as well.

[oldfogey]

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.

[Cloth-Ears]

Tax is just a claim on your fortunes and shouldn't be a negative tail to wag your dog so long as it is a fundamentally a good thing, as I believe b-t-l could be for me. I think that the fundamental things about buy to let to bear in mind are these :

1) Noone's going to lend you to gamble on equities or horses but they will give you half or more for this stable, recoverable and self sustaining ( through rents ) asset. You're effectively getting half or more of a gigantic aset effectively for nothing.

2) The annual returns yield a percentage far higher than money invested in any accounts. By retirement, when hopefully the debt is cleared, that's steady and substantuial income to milk from it. Also it's something to pass on to your beneficiaries.



Obviously, it's only open to those with enough for the neccessary high deposit it in the first place, but for those that do it seems a no-brainer.

Yes, regular ( and tax efficient ) pension schemes are a good idea and can be done as you go as well.

Buy to let can be dodgy when you try to build a house of cards rather than a more modest project on thick strong foundations, or also if you buy in at a bad price combined with later difficulty in getting rented. Now, there are some good prices waiting potentially to rise back, plus there's tremendous rental demand too.

Another thing of great relevance to those in later working life - say late thirties, forties and on, is this. It's going to be extremely difficult and annually burdensome to get the same results in future retirement income from a short pension scheme started late, compared to a buy to let. Remember, it's self sustaining ( touch wood there being no major trouble along the way ) and you're effectively getting more than half the asset for nothing - and an asset that earns a good yield for you in retirement. In my case, it's this late start, to supplement inadequate provision from a previous occupational scheme, that drives this. Looking at my options, the buy to let really is a no brainer.

[mighty ant]

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.

[johnniebaby]

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

[Cloth-Ears]

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.

[Cloth-Ears]

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.

I disagree.

[johnniebaby]

I disagree.

[Cloth-Ears]

I agree.

[unclepuncle]

Whats a pension?

[i_should_coco]

Whats a pension?

These days, just another way of paying tax.

[johnniebaby]

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.

[oldfogey]

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.

[mighty ant]

The income tax and CGT free only applies to your main residence, not 2nd or holiday home.

[Cloth-Ears]

Ah yes CGT, yes I know. But it doesn't matter, because the whole idea is to have and keep a cash cow for retirement. All CGT would do is reduce my estate at death.

[Cloth-Ears]

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.

Better ? It would have to do very well. Remember that the buy to let is leveraged by the fact that you're being loaned at least half and is self paying through the rents. Noone is going to lend you to buy equities. Remember that. Plus they are are much more uncertain than bricks and mortar. Of course you can still do investment out of your regular earnings, but I mean for somewhere to place a big lump sum now, I think b-t-l is really great - to use that AND someone elses's money to do it.