What to do. Financial advice

[PJdB]

Laying it on the line here:

I am 44 years old, I live in a lovely 2 bedroom flat which is close to where I work, it's worth £300k, my mortgage is 70k (fixed rate 1.69%). I have 24k saved in the bank. I live alone. Not sure (probably don't) want to live in a 2 bedroom flat all my life, so wouldnt mind buying a house, however, I do like the idea of paying off the mortage, which, I could probably do in 5 years time if I stay where I am. However, I am wondering whether I should invest in a buy-to-let instead?

Continue to overpay-off-the-mortage, or invest some money somewhere else? Propery seems like a good option.

Penny for your thoughts?

[Andyg]

Chances are the mortgage is costing you more than the interest payments you are getting on the savings, so that's a net loss.

Cant help with the BtL however I think many of the tax advantages have now gone, plus a better investment might be ploughing money into a pension fund assuming of course you intend to some day retire.

The down side of moving to a bigger property may be higher untility bills, council tax, etc - expensive if you don't really need the space. Plus you have the costs associated with moving.

[awright101]

Looks like your in a good position. If it was me I would get the house and then focus on paying that down. It’s a nice feeling knowing you don’t have to move again

[chrisparker]

You get one crack at this life, get the house you want. If you can keep the flat and use that for BtL you're winning.

[GOAT]

pay off the mortgage and put what you can spare into a pension
then pull up your drawbridge
were doomed I tell ye dooooomed.

joking aside, I've been mortgage free many years and its a great feeling, but so is having that nice house, garden and garage etc.
so, without sounding patronising, think hard about how much you need those things vs what guarantees of income and lifestyle you want in your retirement, which probably seems a long way off to you now. it isn't.
I know you'll get the "bollocks! life is for living" comments but I'd respectfully suggest that you're at an age where the next few years decisions will prove important in terms of the degree of comfort you wantfor the remainder of your life.

[ryanb741]

I'd agree with what GOAT says. I have a well paying job although with a profoundly autistic son my wife is unable to work so it is a single income. We too live in a 2 bedroom apartment in a nice area of Kingston. Would love a house but actually the trade off for us would be being far away from shops etc and basically just cleaning all day(!) so have decided to stay in the flat for now. On the flip side I have been contributing fairly heavily to a private pension with the aim of cashing in my chips well in advance of my state pension age and buggering off somewhere warm to live a retirement. As we don't need the house now and don't feel actually having it would increase our enjoyment of life materially (more space and a garden vs close proximity to shops and amenities, transport, grounds etc being looked after by a management company) the trade off isn't warranted for now. But that situation may change.

If it makes you feel better I am only 2 years younger than you and have around £390k left on the mortgage so paying that off isn't realistically an option any time soon. Paying a huge series of medical bills combined with a costly divorce 9 years ago will do that to a man :)

[Mick P]

The best advice (which I took) was to clear all debts asap and then start pumping every penny into long term investments. Even if the investments don't perform, you will still own your house 100% and there is nothing sadder than an old person still paying off a mortgage especially if they have little savings or a rubbish pension.

I went into BTL and did well but the good days are over. Basically the only money you will make are on capital appreciation thank to the phasing out of tax relief on interest paid on the loan and you have the hassle of dealing with tenants who want instant repairs etc etc. You can easily save a couple of grand on the rent paid but an unforseen repair or even a change of tenant can easily wipe that out. Ten years ago everyone with a bit of cash went into BTL, today a lot of them are selling up and pushing the money into equities.

No one can predict how property prices will perform in the future but equities tend to mirror property and it only takes a couple of days to sell them and have the money in the bank. Selling a property normally takes a lot longer.

Also a mortgage free property attracts a better equity release deal later in life than one with a mortgage charge still against it.

Clearing your mortgage at the age of 50 is something everyone ought to do and at 44 you are running out of time.

I pumped a pile of money into Tracker funds which are easy to understand, have done well and takes 5 minutes to sell with the money in the bank a couple of days later.

[sish101]

At the risk of being flippant (and obviously with due regard to family and work commitments), have you considered living elsewhere?

There are many (nice) parts of the country where that amount of money would get you a good sized detached house with cash to spare (to perhaps spend on watches...!)

Sent through the ether by diddling with radio waves

[Parabola]

Also agree with goat. I don't know own where you live but 300k for a 2 bed flat seems high. If it is possible or desirable to move, there's plenty of parts of the country where less than that will get you a nice house (where I live in Rugby for one)

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[Pete D]

I’m with Goat and Mick P. Houses are not the source of increasing wealth that they once were. Further, they are somewhat illiquid investments. Lastly, on the BTL front, tenants are all too frequently PIAs....letting agents take a fair wedge too....


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[ryanb741]

The best advice (which I took) was to clear all debts asap and then start pumping every penny into long term investments. Even if the investments don't perform, you will still own your house 100% and there is nothing sadder than an old person still paying off a mortgage especially if they have little savings or a rubbish pension.

I went into BTL and did well but the good days are over. Basically the only money you will make are on capital appreciation thank to the phasing out of tax relief on interest paid on the loan and you have the hassle of dealing with tenants who want instant repairs etc etc. You can easily save a couple of grand on the rent paid but an unforseen repair or even a change of tenant can easily wipe that out. Ten years ago everyone with a bit of cash went into BTL, today a lot of them are selling up and pushing the money into equities.

No one can predict how property prices will perform in the future but equities tend to mirror property and it only takes a couple of days to sell them and have the money in the bank. Selling a property normally takes a lot longer.

Also a mortgage free property attracts a better equity release deal later in life than one with a mortgage charge still against it.

Clearing your mortgage at the age of 50 is something everyone ought to do and at 44 you are running out of time.

I pumped a pile of money into Tracker funds which are easy to understand, have done well and takes 5 minutes to sell with the money in the bank a couple of days later.

Agree 'ish'. If you bought a flat in London for say £500k as a first time buyer you may have a £450k mortgage against it. You are probably at least 35 years old. Good luck clearing £450k off in 15 years. Huge difference to buying a flat in Birmingham for £150k with a £100k mortgage. Of course what matters is the equity in it and the strong unlikelihood of wanting to retire in London means that can be capitalised and put into another property where prices are much lower

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[PhilT]

Everyone seems to be broadly in agreement here, so let me put forward an alternative as devil’s advocate.

Your mortgage is the least expensive way to borrow large chunks of money, and interest rates are at historically low levels, so one option is to use this money to invest elsewhere - buy to let, shares (don’t forget the magic annual pension allowance), whatever you think is going to give you a higher return than your mortgage interest over time.

If your plan is to retire in the next 10 years then you may need to take a more conservative approach to paying off debt (or a more aggressive approach to growing your pension fund!) - your own personal circumstances and preferred lifestyle should dictate.

I bought a lovely (small) house with a chunky mortgage 10 years ago (at 42) with no real thoughts about retirement, but I wanted to have a house in the country with a garden more than I wanted to pay off a mortgage. Only you will know what’s most important to you.

[Boss13]

Why are all so big on pensions? I have always opted out. Just cannot trust how that money is invested and by the time I get to retirement age...if I do...hopefully I wouldn't need the money and it will not be as useful as enjoying it right now. (Ready to get flamed down!!)

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[PhilT]

Why are all so big on pensions? I have always opted out. Just cannot trust how that money is invested and by the time I get to retirement age...if I do...hopefully I wouldn't need the money and it will not be as useful as enjoying it right now. (Ready to get flamed down!!)

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I come from a long ancestry of delayed gratification :-)

Pensions are one of the few ways to invest money from your gross income. You can in many/most cases choose yourself where the money is invested, and the tax perks continue when it comes time to take your money and spend it.

The main drawback of course is the money is locked away until you’re 55.

[broxie]

Why are all so big on pensions? I have always opted out. Just cannot trust how that money is invested and by the time I get to retirement age...if I do...hopefully I wouldn't need the money and it will not be as useful as enjoying it right now. (Ready to get flamed down!!)

If you think you can survive on a state pension and are sure it will exist when you get there, then by all means opt out of pension schemes. I started with a real bunch of shysters in the 1980s (Allied Dunbar) but over the years benefited from a defined benefit scheme and moving my drawdown pot to more trusted advisors. I'm 62 soon and in the very fortunate position that I can retire on a very large % of my current salary. I'd leave tomorrow except I actually love my job too much!

Not paying into a pension is not a sensible decision whilst the tax incentives are there. As an example, if you are a higher rate (40%) tax payer and pay in a company's salary sacrifice scheme (they save the employers NI and you get something like a 10% uplift), then for each £100 you put in, you have lost just £58 out of your net pay (40% tax 2% NI) but your employer uplifts the £100 to £110 so for a cost to you of £58, you get £110 in your pension pot. That is almost doubling your money straight away.

My regret is not paying into a private pension sooner in life. The later you leave it, the less chance Einstein's 8th wonder of the world has to work it's magic.

[Ikincooper]

Being a landlord has given me some good opportunities over the past 12 years or so but it can also be stressful at times (tax returns, empty flats, mortgage payments, boilers breaking, tenants causing damage, tax changes etc...). Here’s my experience and reason for continuing with BTL...

I first rented out my 2 bed flat when I went travelling some 12 years ago, when in my mid 20s. Since returning to the UK (3 years later) I’ve bought 2 other flats (we lived in one of them for a few years) and then approx 3 years ago we purchased our current family home (nothing extravagant). All the above has been possible off the back of capital increases and subsequent mortgage increases primarily at the first 2 bed flat and by deciding to live in properties well below what my peers (or the Jones!) would live in! In fact my first flat appreciated to such a point that it was worth more than our family home at one point.

All sounds good, however recent tax changes are making times harder and 2 flats have been empty for a combined total of 8 months over the past 18 months putting strains on our family cash flow. The first flat has plummeted in market value to the tune of a £70k drop and mortgage payments still need making even when rent isn’t coming in. Looking at my volume of debt can at times become scary too (especially given the large recent depreciation on one flat!).

Ultimately BTL allows you to leverage your capital and so if capital appreciation occurs then you can win bigger than if just investing say in shares. I’ve decided that over the long term (20 years or so) it’s worth the hassles and risks. I’m now 37 and would hope to have fully cashed out in the next 15 years, so that I can focus (without the stress/risks) on retirement planning. My view is that your early years (20/30/40s) are for riskier investments, with more cautious approaches to be taken during 50/60s as retirement gets nearer.

Boils down to if you can you tolerate the ride/hassle in my view. I would also recommend paying into a pension too (half your age as a % of your salary if you can!). Oh and keep a side pot for a nice watch too, haha


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[Gee252]

Best days work I did getting my mortgage off before I hit 50.
The monthly payments were not the be all and end all but the feeling of not having it hung over you cannot be discribed.
My plan now is to spend the next 5 years getting my pension pot as full as I can then relax and slow down (hopefully! None of us can predict the future)
To be fair I have spent the past 30 plus year up to now going flat out!!

[Boss13]

I come from a long ancestry of delayed gratification :-)

Pensions are one of the few ways to invest money from your gross income. You can in many/most cases choose yourself where the money is invested, and the tax perks continue when it comes time to take your money and spend it.

The main drawback of course is the money is locked away until you’re 55.

What happens if somebody doesn't reach 55!? Or you need access to the money before 55? Does it pass on inheritance without tax penalties?

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[marcus fenix]

Agree 100% with boxie. I am fortunate enough to have paid off my mortgage (on a modest house) by the time I was about 50. I also had a defined benefit pension. I'm shovelling money in to the new defined contribution scheme now (DB scheme closed 18 months ago) and looking forward to an early retirement. I've got friends who did nothing, or nothing significant, on the pension front until way too late. They are now lookin at a very long forced career, even the one with the amazing big house!

Ian

[wileeeeeey]

It would be worth thinking about how long is left on your lease and what the service charge and ground rent are.

Service charge and ground rent combined down south can be £3.5k per easily, and that's for flats without lifts or anything too fancy.

Also if your lease goes below 80 years you will have to pay for a top up plus there is a premium to pay for it being below 80 years.

I know with houses you're more exposed to costs but knowing approx £30k goes down the drain every 10 years would put me into a house.

[PhilT]

What happens if somebody doesn't reach 55!? Or you need access to the money before 55? Does it pass on inheritance without tax penalties?

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There are people on here better qualified to answer this, but I believe that there are special cases (serious illness for example) that would allow you early access to the money. Deposit for a house wouldn’t be a good enough reason.

Tax rules for inheritance of a pension have changed in recent years, but the exact rule depends on the type of pension scheme, when you die and in some cases who inherits the money, among other things.

If you think you have a better scheme to have a pile of cash that will keep you comfortable into old age, then good for you (please share!) If you’re convinced you won’t live to 55 then that’s a pretty huge gamble in itself (unless you know for sure). Average life expectancy is 80-85?

[Andyg]

What happens if somebody doesn't reach 55!? Or you need access to the money before 55? Does it pass on inheritance without tax penalties?

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if you don't reach 55 then you don't have a problem - chances are however that you will. If you need the money before 55 then depending on the type of pension you have, you can sell it, however most people would strongly recommend against doing that, no matter how skint you are.

As for inheritance, it depends on the pension you have. If it's a final salary scheme, then your significant other will get a percentage (typically 50%) of your pension until their death. If it's a money purchase pension, like a SIPP, then 100% of the money transfers over to them, and is excluded from the estate/inheritance tax bill. Money released will have be subject to normal pension/income tax rules, as applicable.

[broxie]

Continue to overpay-off-the-mortage, or invest some money somewhere else? Propery seems like a good option.

Penny for your thoughts?

Just to add to my previous post. Whilst mortgage interest rates are so low, I would personally continue with the mortgage and pump as much money into your pension as you can. Paying off a mortgage at the expense of pension contributions whilst you still have at least 20 years to retirement would be false economy.

Property investment is a business. Would you want to start a business in the current environment? I think BTL has had it's day.

There was an article in the Telegraph a while back. It compared two people age 21. One put x amount each month into a pension from age 21 to 30 then stopped after 10 years contributions. The second person only started paying in the same amount at age 30 and continued to age 65 (35 years of contributions). The one who only paid in 10 years worth from age 21 had a larger pension at retirement than the one who put in 35 years of contributions at the same rate. Such is the power of compound interest.

Anyone without a pension scheme in their 30s or 40s is going to get a rude awakening in later life. Similarly those that think £100 a month into the scheme will cut it. Have a look at some online calculators that show roughly what you need to contribute. As mentioned earlier, I have a very nice pension pot now but I paid in various schemes from age 28 then upped it to 30% then 50% of my salary from age 38 until I turned 60. I just got used to living on a lower income. The other advantage was that during work, being used to half pay means that that pension only had to provide 50% of final salary and I'd retire on the same money as I was getting paid whilst working (in fact £5k more as there would be no NI payments in retirement) since I'd no longer be paying into that pension scheme.

Before the annual allowance was cut from £255,000 to £50,000 in April 2011, I dumped all of the previous three months salary into my pension knowing the door would close on higher contributions. Again, over time, this has worked in my favour.

I cannot emphasise enough how important your pension is whilst you are still working and have prospects of an improving salary during your golden years. Putting your head in the sand and spending it on cars and watches will come back to bite you when you try to retire.

[ryanb741]

This

For example if at age 40 you had £100k in a pension on an index tracker (something like Vanguard Lifestrategy) then based on the typical net return per year after fees and inflation of around 5% (typically a tracker will generate 8% including dividends, then factor in 2.5% inflation and 0.5% fees) then if you didn't pay a single penny more into the fund from age 40 until your retirement at age 65 you would have around £340k in real terms at age 65. Not a fortune but much bigger than the vast majority of private pensions.

Just to add to my previous post. Whilst mortgage interest rates are so low, I would personally continue with the mortgage and pump as much money into your pension as you can. Paying off a mortgage at the expense of pension contributions whilst you still have at least 20 years to retirement would be false economy.

Property investment is a business. Would you want to start a business in the current environment? I think BTL has had it's day.

There was an article in the Telegraph a while back. It compared two people age 21. One put x amount each month into a pension from age 21 to 30 then stopped after 10 years contributions. The second person only started paying in the same amount at age 30 and continued to age 65 (35 years of contributions). The one who only paid in 10 years worth from age 21 had a larger pension at retirement than the one who put in 35 years of contributions at the same rate. Such is the power of compound interest.

Anyone without a pension scheme in their 30s or 40s is going to get a rude awakening in later life. Similarly those that think £100 a month into the scheme will cut it. Have a look at some online calculators that show roughly what you need to contribute. As mentioned earlier, I have a very nice pension pot now but I paid in various schemes from age 28 then upped it to 30% then 50% of my salary from age 38 until I turned 60. I just got used to living on a lower income. The other advantage was that during work, being used to half pay means that that pension only had to provide 50% of final salary and I'd retire on the same money as I was getting paid whilst working (in fact £5k more as there would be no NI payments in retirement) since I'd no longer be paying into that pension scheme.

Before the annual allowance was cut from £255,000 to £50,000 in April 2011, I dumped all of the previous three months salary into my pension knowing the door would close on higher contributions. Again, over time, this has worked in my favour.

I cannot emphasise enough how important your pension is whilst you are still working and have prospects of an improving salary during your golden years. Putting your head in the sand and spending it on cars and watches will come back to bite you when you try to retire.

[PJdB]

THANK YOU ALL so much. The written word doesn't do it justice, but I really am grateful for all your thoughts, - really interesting and valuable reading I feel.

To clarify a couple of things:

Yes, most of the 24k I have in savings are earning less than the mortgage interest rate, however, it's there for security in case I lose my job, plus some more to cover life's luxuries.

I don't contribute to a private pension, I only contribute to a work Standard Life pension, which has £123k in it at the moment. I do have a private pension which was some tax relief thing I opened about 25 years ago, it has about 20k (I think I will consolidate it so they're both in the same place), I contribute between 4% - 8% to my work pension and they match my contribution thereabouts, I get the option to change my contribution once a year, for the last few years I lowered it to 4% in order to overpay my mortgage. My Dad got stung badly with one of his pensions, so I figured my money was better chopping the mortgage down.

No lease - we collectively own the freehold. Management agent charges & ground rent are around £1k PA.

Equities I know little about, I will research. Maybe that's a better option than property...

I am not *desperate* for a garden, garage etc, my main concern is getting old and having to put up with the occaional probematic neighbour as can happen from time to time. I am pretty happy in my flat, it's a short walk to the train-station, the town.. I'm just wondering about my future. I guess I do have the option to live somewhere a little cheaper later on in life and exchange my flat in Surrey for a house. I also have the option of co-habiting one day (not sure I could ever do that, - I'm happy single at the moment! Maybe I will feel differently later! :) )

If I stay where I am I think my mortage will be paid off by the time I am 50. If I upgrade my home, it won't be. But I guess I will still own the same amount of equity, and if property goes up by percentage, the capital gains will be more.

A collegue has mentioned a friend who brought a BTL near a University, and the lettings to students went through the University, - in 6 years the mortgage is now paid off. Sounds like an attractive option, so I am going to find out more about this.

I am not keen at the moment to live elsewhere, I do like it in Surrey for the moment at least, and have a bit of a life here.

Retiring somewhere warm I think is worth considering...:)

Borrowing on the mortgage to invest elsewhere, in equities etc... is that really a viable and worthwhile option?!? Guess it needs research.

Broxie - 10 years paying into a pension + 35 years interest worked out more than 35 years continually paying into one!?!? 30% - 50% of your salary... for over 20 years, - wow.

[wileeeeeey]

Share of Freehold is fantastic for service charge and lease. Real minimal costs and totally within your control.

You could sell your flat to buy a house and in another 25 years be selling the house to buy a flat closer to the shops etc. Could be saving stamp duty in the long run staying.

[Mr Pointy]

Given that you are 44 it won't be that long before it becomes more difficult to get a new mortgage. Most vendors want them paid off around the age of 70 so if you wait until you are 50 then you may have to accept a shorter term of maybe 20 years.

My biggest regret (financially) is staying in my house too long & not moving more frequently & now it's too late for me to do so.

The emergency pot of money is a good idea; if you can survive for six months it's a very comforting feeling.

BTL takes a particular kind of personality to put up with tenants. All of my aquaintances have had bad tenants & it's just not something I want to expose myself to. You may be different.

Pay attention to your pensions; they are very tax efficient but they need to power of time to let the compound interest work.

[Mr Pointy]

Here's another Telegraph article that might be of interest:
https://www.telegraph.co.uk/personal...ill-net-25000/

You might also want to start reading the Finance thread over on PH:
https://www.pistonheads.com/gassing/forum.asp?h=0&f=206

There are lots of pointers on that thread to other websites & forums:
https://www.pistonheads.com/gassing/...=206&t=1811647
https://monevator.com/

[ryanb741]

Also check what your work pension fund is. Often they are very poor funds with returns much lower than low cost index trackers. I took mine and moved it to a Hargreaves Lansdowne SIPP and around 80% of it is in a Vanguard Lifestrategy 80 plan, the rest around things like Baillie Gifford and so on. New company is more of a start up in the UK and enrolled me in a NEST pension. Lots of people said it is a terrible pension scheme (but as employer contruìibutes then may as well do it) however I moved it from the default fund and put it into their high risk portfolio and it is up 20% YTD. At the end of every year I will move whatever is in NEST to Hargreaves Lansdowne and rinse and repeat.

[demonloop]

BTL takes a particular kind of personality to put up with tenants. All of my aquaintances have had bad tenants & it's just not something I want to expose myself to. You may be different.
.

This x100

The last two properties I bought were from would be landlords cashing out after less than 12 months.

It’s really not for everyone, and you need to be available during the day so ideally self-employed and able to nip out if required. I manage my v small lot myself, as I’m too miserable to pay an agent, so every issue comes straight to me.

This week so far I’ve had one tenant with a leaking shower, through to a downstairs ceiling. So plumber deployed, bill to pay. Another tenant wanted a sofa collected that she didn’t want (did that myself) the same house needs the roof and gutters cleaned so currently pricing that around a few locals. And I have bank valuations tomorrow so need to be around for that. In with solicitor next week to discuss the next purchase and so it goes on.

If you can cope with all of the above, it’s still a very good investment in my view

[broxie]

Broxie - 10 years paying into a pension + 35 years interest worked out more than 35 years continually paying into one!?!? 30% - 50% of your salary... for over 20 years, - wow.

Actually I was wrong on the first point, it was 10 vs 40 years ...

https://www.telegraph.co.uk/finance/...ng-for-40.html

Yes, 30~50% of my salary for over 20 years. The reason was I was skint and badly paid when I changed career (from engineer to pilot). When I got my current job, I kept my net income the same as I was used to being skint by dumping it into pensions and property but now it's payback time. I am fortunate enough to now have a pension pot of a combined DB and drawdown worth a shed load. 25 years ago I didn't have a bean to rub together. I wanted to put this out, not in a boastful way but to let people in their 30s know that it can be done but it takes sacrifices. I have only once ever bought a new car (kept that for 13 years) and don't have extravangant tastes but been very fortunate in property investment, doing up my own houses.

Maybe it's a babyboomer thing but when I look at my younger colleagues, they seem to want everything now. They have new cars, the full Sky package, the latest iPhone etc. But discuss pensions and they think that's something they needn't be bothered with until later in life. The problem as I have discovered, is life has a habit of creeping up on you.

[mowflow]

Why are all so big on pensions? I have always opted out. Just cannot trust how that money is invested and by the time I get to retirement age...if I do...hopefully I wouldn't need the money and it will not be as useful as enjoying it right now. (Ready to get flamed down!!)

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My view is that personal pensions are not worth investing in these days. If your employer offers a contributory scheme it makes sense to maximise that as it is essentially an unseen pay rise/bonus from both your employer and the tax man.

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[Rob s]

Maybe it's a babyboomer thing but when I look at my younger colleagues, they seem to want everything now. They have new cars, the full Sky package, the latest iPhone etc. But discuss pensions and they think that's something they needn't be bothered with until later in life. The problem as I have discovered, is life has a habit of creeping up on you.

As a young(ish) person who had invested into a good pension and been careful with money I do worry about the lack of pension provision I see within my age group and younger. I worry that those that have saved will just be taxed later to pay for those that haven't made any provision.

[PJdB]

Thank you again for your continued comments, - really interesting, lots for me to consider & research here.

Broxie - I'll raise my glass (currently a mug of tea) to payback time. I wish you, and everyone on this thread, wealth, health & happiness :)

I've just checked out my little private pension, I still don't completely understand it, I'm waiting for info back from Aviva, and to speak to my Dad who is currently immigrating! However, my parents *applied* for a Government provided pension (that's all I know about it), whereby I make zero contribution, - back in 1992. It is not a state pension, it's a private one with Aviva, funded by the Government. I haven't contributed a penny to it and today it's worth £45,000. It's not something that I've herad of before, not sure if they're still offering it today. How glad am I that my Dad found out about this and acted on it. I'm thinking of consolidating the money into my work pension.

Wonder if anyone here is familiar with what this is? I'll offer more detail when I have it.

[awright101]

Actually I was wrong on the first point, it was 10 vs 40 years ...

https://www.telegraph.co.uk/finance/...ng-for-40.html

Yes, 30~50% of my salary for over 20 years. The reason was I was skint and badly paid when I changed career (from engineer to pilot). When I got my current job, I kept my net income the same as I was used to being skint by dumping it into pensions and property but now it's payback time. I am fortunate enough to now have a pension pot of a combined DB and drawdown worth a shed load. 25 years ago I didn't have a bean to rub together. I wanted to put this out, not in a boastful way but to let people in their 30s know that it can be done but it takes sacrifices. I have only once ever bought a new car (kept that for 13 years) and don't have extravangant tastes but been very fortunate in property investment, doing up my own houses.

Maybe it's a babyboomer thing but when I look at my younger colleagues, they seem to want everything now. They have new cars, the full Sky package, the latest iPhone etc. But discuss pensions and they think that's something they needn't be bothered with until later in life. The problem as I have discovered, is life has a habit of creeping up on you.

Fair play to you but I guess as a pilot your net income after 50% into a pension is still a good lump. Not many can do that.
Personally I think there is a balance. I would not want to deprive myself during my life to pay for a pension. There no guarantee you would get there!.
I’m not gong to be a wealthy pensioner but I’ve had fun along the way, responsibilities with kids and have few regrets. I’m 55 now and still away off retiring but looking back have no regrets about changing anything
Andy

[Man of Kent]

Don't forget to allow for any inheritance you might get. Obviously not garuanteed but worth bearing in mind as a possible pension top-up down the line.

[broxie]

Don't forget to allow for any inheritance you might get. Obviously not garuanteed but worth bearing in mind as a possible pension top-up down the line.

I used to think that but after 3 wives my Dad was skint and my Mum had not much.

[PJdB]

There might be, and that would of course be great, but I am certainly not expecting any inheritance. I don't like the idea of banking on such a thing, and it's entirely possible that any inheritance will be spent on nursing home costs anyway.

[BillN]

I'm well past retirement

I put a load of £'s into Equitable Life in my 30's and 40's which built up what Equitable Life "guaranteed" would be a £55k a year pension, from the age of 65 - which turned out to be "bugger all" in comparison, (if I took an annuity now with whats left of the Fund it would be £5k a year).

since them I would never advise anyone to put all but a small % of their eggs into the Pension basket, just don't trust the Financial Services industry - they get a good salary and fat bonus if they do well and a fat salary if they don't

Property has been our far most beneficial investment and if you build up capital in your house you can trade down when you retired and the kids have left

apart from that the ISA limit is now £20k a year and if you fancy managing your own money you can build up a good Fund

[broxie]

apart from that the ISA limit is now £20k a year and if you fancy managing your own money you can build up a good Fund

I assume as you are averse to the investment world, you're referring to cash ISA. Unfortunately these don't make sense for long term investment (over 10 years) since you will never beat inflation. Better to have a stocks and shares ISA and a tracker fund. So, similarly, what's wrong with a SIPP with self selected tracker? You get all the tax advantages of money on the way in, hopefully at high rate tax relief rates (40% or more) ging in and basic tax of 20% on the way out.

Many people were burnt by the financial services industry in the 80's and 90's which is why legislation is so tight around it, but you'd do worse than a "lifestrategy" type fund (eg Vanguard LS80) in a SIPP than you would putting taxed money into a cash ISA. Especially if you're a high rate tax payer.

[BillN]

I assume as you are averse to the investment world, you're referring to cash ISA. Unfortunately these don't make sense for long term investment (over 10 years) since you will never beat inflation. Better to have a stocks and shares ISA and a tracker fund. So, similarly, what's wrong with a SIPP with self selected tracker? You get all the tax advantages of money on the way in, hopefully at high rate tax relief rates (40% or more) ging in and basic tax of 20% on the way out.

Many people were burnt by the financial services industry in the 80's and 90's which is why legislation is so tight around it, but you'd do worse than a "lifestrategy" type fund (eg Vanguard LS80) in a SIPP than you would putting taxed money into a cash ISA. Especially if you're a high rate tax payer.

No not exclusively Cash - I have a mixture of Trackers and Shares that I have selected

I am not advising anyone, just commenting of Pensions and Property - I have always actively bought Stocks and Shares and as you probably know, you win some and you loose some, but all have been my choice, even in the Pension Fund that I also have

[Senninha]

May be helpful

https://i.imgur.com/BfHzwr9.png

From UKPersonalFinance over on Reddit

[smalleyboy1]

I'm well past retirement

I put a load of £'s into Equitable Life in my 30's and 40's which built up what Equitable Life "guaranteed" would be a £55k a year pension, from the age of 65 - which turned out to be "bugger all" in comparison, (if I took an annuity now with whats left of the Fund it would be £5k a year).

It might be a generational thing but this is also my worry. You work hard for 45 years paying into a pension and then when you get to retirement age, it doesn’t amount to very much. I think those who reached retirement age during the last recession, got very poor levels of annuities.

I get the tax benefits of a pension and pay into one as luckily my employer matches my contributions. However I also have a few BTLs, some shares and a small amount of cash. I’m an unsophisticated investor and have a limited understanding of investments, yields etc. I suspect I might be able to get better returns and I should take some professional advice but I am certain that I won’t be relying on my pension to be my main source of income for my retirement.

[Matdaytona]

I'm well past retirement

I put a load of £'s into Equitable Life in my 30's and 40's which built up what Equitable Life "guaranteed" would be a £55k a year pension, from the age of 65 - which turned out to be "bugger all" in comparison, (if I took an annuity now with whats left of the Fund it would be £5k a year).

since them I would never advise anyone to put all but a small % of their eggs into the Pension basket, just don't trust the Financial Services industry - they get a good salary and fat bonus if they do well and a fat salary if they don't

Property has been our far most beneficial investment and if you build up capital in your house you can trade down when you retired and the kids have left

apart from that the ISA limit is now £20k a year and if you fancy managing your own money you can build up a good Fund

My dad (passed 12yrs ago)had a 7 figure pension with equitable life tried to get me in with them (but no money and big family)so luckily couldn’t contribute I think equitable offered him a 5 figure settlement put me off pensions for life I know invest i. Commercial property through my ltd co

[PJdB]

I think I should be able to borrow about 100k on my mortgage.

A friend of mine has a similar amount of money of which they have invested via a financial advisor, for the past three years, she's had a return of circa 10% PA, - the FA takes abot 1%.

It sounds very simple, - shall I borrow on my mortgage and invest it? All profts will be spent paying off the mortage of course! Or is this somehow 'not allowed'?

[Devonian]

I think I should be able to borrow about 100k on my mortgage.

A friend of mine has a similar amount of money of which they have invested via a financial advisor, for the past three years, she's had a return of circa 10% PA, - the FA takes abot 1%.

It sounds very simple, - shall I borrow on my mortgage and invest it? All profts will be spent paying off the mortage of course! Or is this somehow 'not allowed'?

I definitely wouldn’t do that - unless you can afford to lose it which in your case you can’t. As it would be borrowed money. Too many potential downsides and in a way it’s just gambling.

If you were pulling money out to used as a deposit for a buy to let, knowing the rent would take care of the interest etc, then I could see some logic in that. Assuming you’d worked out the extra stamp duty, reduction in tax relief going forward and the deal still was viable.

Pensions are now the best possible investment for the majority of people (not everyone but most) due to the tax efficiency and the very flexible rules under pensions freedom, which came in a few years back.

However that wasn’t always the case and they were very restrictive until the changes - could it go back? Unlikely but who knows eh. My advice would be to ‘not keep all your eggs in one basket’. Put the majority of your spare money in pensions, some in accessible investments like ISA’s and if doable spread it even more by having some in property.

[greenandblack]

All the podcasts I listen to recently (Missing Cryptoqueen, Who the Hell is Hamish) are all about people being conned out of their pension/life savings and I'd be wary of sticking my cash anywhere I didn't understand.

Completely agree with the "not all eggs in one basket", and also useful having some cash in hand for suprises - but then if it's in a stocks & shares ISA you should still be able to get it fairly easily.

[PhilT]

If you can increase the mortgage amount at the current rate (1.69% ?) there are fixed rate savings accounts (including ISAs) out there offering more than 2% , but you might not be able to do that and there may be charges involved that cancel out any benefit.

The pension option is like getting free money to top up your initial investment, but it’s still typically going to be an investment with an element of risk, as is a buy to let. The tricky bit is deciding what level of risk you are happy with and for how long.

[mr.chef]

If you can increase the mortgage amount at the current rate (1.69% ?) there are fixed rate savings accounts (including ISAs) out there offering more than 2% , but you might not be able to do that and there may be charges involved that cancel out any benefit.

The pension option is like getting free money to top up your initial investment, but it’s still typically going to be an investment with an element of risk, as is a buy to let. The tricky bit is deciding what level of risk you are happy with and for how long.

Would it really be worth borrowing £100k to make £300 odd?