No it can't, that's the point you've so fragrantly missed. How much longer would you like me to take the mickey?
Pensions: Explain to me why it's a sound investment...
- Thread starter Mr Jones
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No it can't, that's the point you've so fragrantly missed. How much longer would you like me to take the mickey?
Of course it can. You put money in, the value of it increases over time in most cases. You seem to be assuming that when someone sells up that they must spend all the money they get back on the new property to live in.No it can't, that's the point you've so fragrantly missed. How much longer would you like me to take the mickey?
Or are you seriously suggesting that property doesn't make people money as an investment?
I am not suggesting it - it's not a new concept.
As you approach retirement you should move out of mostly shares to mostly low volatility assets. Yes, you can't time it exactly but you probably have some idea. You can't retire before 55 so anything before then is not an issue.
That is a consideration, but the bit between 60-65 and 80-85 a person can be relatively active and healthy theses days. In fact they may be more active and spend more because they have more free time.
no it's not. If you die before retirement, then it's generally paid to the nominated beneficiary without any taxation.
However, if you are "retired" and you are in a income drawdown contract then the remaining fund is passed on to beneficiaries (kids etc) less a 55% tax charge. (spouse has other options open to them)
So there is a large distinction between "pre" retirement and "post" retirement.
I presume in your case, a parent recently passed and was probably inc receipt of a pension i.e in retirement in which case the 55% is taxation on the funds in "post" retirement is correct.
The 55% tax charge should only apply if you have already taken your tax free cash and someone takes drawdown instead of an annuity. In which case the rest of the fund is treated as post-retirement pot.
It may also apply if a pot exceeds the lifetime allowance.
Pre-retirement pots under £1.5million should not have a tax charge.
Pros of pensions:
As a whole it's a relatively non-risky and rewarding investment, albeit over a long period of time.
- Income not taxed until the point of withdrawal
- No capital required
- Better return as part of an investment fund than you could achieve individually
- Typically bolstered by an employer contribution
As a whole it's a relatively non-risky and rewarding investment, albeit over a long period of time.
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House prices were reasonably stable as a ratio to incomes until Thatcher came along and deregulated the finance industry and flogged off the council houses.
Lending standards can't be weakened anywhere near as much again and the benefit of dual incomes has been already factored into prices.
If anything the outlook is worse. Young people can't afford to buy, job insecurity is worse, full time jobs relatively shrinking and all those babyboomers, who own most of the property, will be starting to die in droves making their heirs pay inheritance tax.
I'm in a pension scheme at work and i pay 4% of my wages which the company matches and i completely know 10000000% that when i should retire at 55 i will be owed nothing and they'll force me to work another 30 years before they pay out the money ive paid in. Someone in the pension scheme will be holidaying off my contributions. How the get away with it i dont know.
My sister in law who works for the NHS posted this on Facebook .... "Just found out that after 25 yrs of pension contributions I am going to have to work 10yrs longer than my colleagues pay more a month and come out with significantly less!
Seriously paying into a pension is a ripp off. They move the goalposts all the time.
My sister in law who works for the NHS posted this on Facebook .... "Just found out that after 25 yrs of pension contributions I am going to have to work 10yrs longer than my colleagues pay more a month and come out with significantly less!
Seriously paying into a pension is a ripp off. They move the goalposts all the time.
Of course houses can make money, but people dont look at the reall figures. As I said earlier, generally with mortgages, you pay pretty much double the house cost you and many people dont take that into account.
People buy a house for £250k and sell it for £600k to down size and say ohhh what a great investment, I made £350k when in reality they have made closer to £100k and thats without any inflation taken into consideration.
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cant agree more. i have 15k in one of these funds. looks ok from an inflation protection point of view. then i i dug abit deeper. the mix and match fund they manage return monthly income around £48-50. oh wait, they then charge £11 every month as management fee....
thats why it's important not to jump onto properties that one dont need for the time being. otherwise the deposit will shrink and LTV/interest will rise. the best thing to do is minimise the outgoing on the mortgage and use any spare money to invest elsewhere.
for example, i have 50k available. i would go for a 150k house rather than 250k house. based on staying at the same 75%LTV, then i now have spare 12.5k which is more than enough to get a second mortgage on a investment-grade rental property in places like warrington, derby, wakefield etc. those will return about 6-7% per year which can help offset the interest from the first mortgage. alternatively, if i want to put my eggs in different basket (asset class) i can put the 12.5k into corp bond market say, General accident preferred share, those will return about the same amount.
same conclusion pops up a few times in this thread already, balance out the resources, dont put all eggs in one basket.
The whole argument as to if a house is an investment is a nil point in regards to a pension. Generally a family will buy a home to live in and upgrade as the family and career grows. This saves rent. Mortgage gets paid off, retire and take a pension that is less than their end salary because they no longer have to pay a mortgage. Some even sell the house and downgrade once the family moves out, creating more cash.
What's the alternative? Rent until you die? It'd cost a fortune with no assets left for family.
What's the alternative? Rent until you die? It'd cost a fortune with no assets left for family.
The NHS scheme is a (Occupational) Defined Benefit scheme, they face a completetly different set of issues to (Private) Money Purchase pensions.
Generally when they downgrade benefits on State backed schemes the accumulated benefits are retained. So you sister will likley keep 25/60th (or 25/80th income+ 75/80th Cash) of final salary. Its only future accumulation that will be done on a less favourable basis. So while yes they are moving the goal posts, they are not doing it retrospectively.
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You don't take out a pension with the aim of leaving lots of cash for your family....except possibly your spouse and different rules apply to that.
There's a few simple points to remember. Yes, housing has significantly outperformed any other investment over the last 40 years. The problem now is that the cost of housing compared to earnings is now ridiculously high (as mentioned earlier, lot's of factors, such as assuming dual incomes, which are now priced in to the market).
I'll lay my cards down now and say we won't see another period of property price rises like that in our lifetimes. This isn't to say that buy-to-let is not still a good invesment - it can be - but people should buy their home foremost as a place to live and value it in that respect, not as a way to make any money. If it was cheaper to rent than buy where I wanted to live, I'd do that instead of having a mortgage (and probably get a BTL mortgage somewhere else) - there's plenty of ways of investing money for your old age that don't involve buying houses at a historically unaffordable level.
cant agree more. i have 15k in one of these funds. looks ok from an inflation protection point of view. then i i dug abit deeper. the mix and match fund they manage return monthly income around £48-50. oh wait, they then charge £11 every month as management fee....
That works out at about 0.88% which isn't to bad for a fund that size in an actively managed investment (although that probably doesn't include dealing costs).
You could get cheaper personally I think up to 0.5% is about right for the fund if its a mixed bag of global assets. My favouite fund manager charges around 0.35% for a global portfolio. You can get it down to 0.1-0.2% if you stick to main markets.
As someone self employed with ZERO pension (aged 34) I'm wondering about how best to go about putting plans in place.
Quite ironic as I'm very interested in equity and precious metal markets, but dont trust pension fund managers to do anything more than just ride the market ups and downs, while taking their kickbacks and management fees.
Obviously not 'tax efficient' but I wonder what would be wrong with, say, overpaying a mortgage on a higher priced house with a view to paying it off 10 years early and using the equity in the house at retirement to buy some kind of buy to let portfolio which would return roughly the same yield as an annuity (6-8%).
Either that or some kind of SIPP where I get to choose the investments, although I don't like these lock outs till age 55 etc.
Quite ironic as I'm very interested in equity and precious metal markets, but dont trust pension fund managers to do anything more than just ride the market ups and downs, while taking their kickbacks and management fees.
Obviously not 'tax efficient' but I wonder what would be wrong with, say, overpaying a mortgage on a higher priced house with a view to paying it off 10 years early and using the equity in the house at retirement to buy some kind of buy to let portfolio which would return roughly the same yield as an annuity (6-8%).
Either that or some kind of SIPP where I get to choose the investments, although I don't like these lock outs till age 55 etc.