Omega Owners Forum
Chat Area => General Discussion Area => Topic started by: LC0112G on 25 July 2018, 14:38:22
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Old school retirement...
I will be retiring at at least 67... With the current odds, I won't need a pension :-X
Planning to live on the state pension alone is planning to live in poverty once you retire till you die. It's less than £8K per year, and as you say you won't get it till you're 67 - perhaps even 70 by then. However, if you save your own money into a private/workplace pension, you can start to draw that at any age post 55. You can then retire and live on that from 55 to 67, at which time the £8K state pension comes in as well.
Or you could just piss all your money up the wall on expensive 'phones and other Apple shyte. I was going to put buy expensive cars, but this is an Omega forum so doesn't really apply.
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Old school retirement...
I will be retiring at at least 67... With the current odds, I won't need a pension :-X
Planning to live on the state pension alone is planning to live in poverty once you retire till you die. It's less than £8K per year, and as you say you won't get it till you're 67 - perhaps even 70 by then. However, if you save your own money into a private/workplace pension, you can start to draw that at any age post 55. You can then retire and live on that from 55 to 67, at which time the £8K state pension comes in as well.
Or you could just piss all your money up the wall on expensive 'phones and other Apple shyte. I was going to put buy expensive cars, but this is an Omega forum so doesn't really apply.
£8546.20 pa.
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Once all the crap is paid off, then I will begin my pension in earnest... Currently not saving anything like enough... However, pension forecasts all seem to be 2-4% growth, which seems shockingly rubbish...
Surely better growth could be had from simply investing monthly in the FTSE 100 :-\
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What is the state pension worth to a married couple these days ? Im sure it isn't double the above figure, despite the state no longer really recognising or valuing marriage.
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£8546.20 pa.
Nope. £8569.67 pa. £164.35 per week, and 52.14 weeks in a year :D
Once all the crap is paid off, then I will begin my pension in earnest... Currently not saving anything like enough... However, pension forecasts all seem to be 2-4% growth, which seems shockingly rubbish...
Surely better growth could be had from simply investing monthly in the FTSE 100 :-\
Pension forecasts HAVE TO, by law, use assumptions in their forecasts that are set by the Govt/Regulators. They're irrelevant. What matters is what YOU decide to invest your pension money in. You can use the default funds which will probably give 'average' returns, or put it all on the FTSE, or choose your own selection of shares, or put it in any of the 10,000+ allowable other investments, or buy a commercial property, or..... The permutations are virtually infinite. About the only thing you can't do is put it all on the 3:30 at Newmarket.
The growth you get will depend entirely on what YOU decide to invest in, not what the projections suggest. If you'd bought $1000 of Apple shares 25 years ago ($1.19 in 1984), instead of $1000 of Apply shyte then it would be worth $162K now ($192.95 today). Add in the exchange rate change between 1984 and 2018 and you might even have £200K's worth. But if you'd bought Poly Peck, Northern Rock, Maplins....etc. :'(
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What is the state pension worth to a married couple these days ? Im sure it isn't double the above figure, despite the state no longer really recognising or valuing marriage.
Each person gets their own state pension, based only on THEIR OWN national insurance contributions. So going forwards (it's a bit complicated at the moment during the transition period), a married couple will get two lots of state pension, assuming both have the full 35 years NI contributions.
When one partner dies their pension will stop, so the other partner has to continue on just their own pension. Also, you get nowt unless you have at least 10 years NI contribs. A stay at home housewife will get nowt unless they pay voluntary NI contributions, and they won't 'inherit' any of their partners state pension should that partner die.
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I have 40 years of contributions. Apparently swmbo has 6 or 7. Might be worth her while paying to bring herself up to 10 years worth ?
Or will they move the goalposts again in a few years and throw the whole thing into confusion again ? :-\
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I have 40 years of contributions. Apparently swmbo has 6 or 7. Might be worth her while paying to bring herself up to 10 years worth ?
Or will they move the goalposts again in a few years and throw the whole thing into confusion again ? :-\
Probably best answered in another thread - If admin want to split this stuff off then I've no objections. However, in the mean time....
You can each check your state pension entitlement here (though you have to register first) : https://www.gov.uk/check-state-pension
It is important you do this to see where you are at. The answer to your question is, as always, it depends.
For you - with 40 years NI I'm assuming you're in your 60's? If you were never contracted out into a private pension scheme then its still entirely possible to get £250+ of state pension per week by the time SERPS/S2P is taken into account. However, if you were contracted out for long periods (into an employer/private pension), then you might only be entitled to as little as £125 p/w. If the state pension checker says you are entitled to less than £165p/w then it may be worth YOU buying extra NI years. Each extra week costs £13.25, and entitles you to about £4.50 per week extra. It therefore only takes 3 years to break even. However, before you do anything, check what your current entitlement is. There are some gotchas where buying the wrong NI years do not increase your SP.
For SWIMBO - How old is she? - Check what she is currently entitled to. She'll get nowt unless she gets to 10 years NI contribs by her SP age. She should have got credits for looking after any kids (whilst claiming Child Benefit) up to age 14 IIRC. So if you've got any kids, then she should have more than 7 or 8 years (at least 14 plus 3 auto credits for 16-18)? If no kids, and assuming she's not up for popping another sprog at her time of life just to get the free NI credits :D, then yes it's almost certainly worth topping up her NI record. I believe she can buy any unpaid years back to 2006, so potentially she could add another 12 years. AIUI each additional year would cost around £700 and would be worth around £4.50 per week extra pension. She can also buy any years between now and when she reaches her SP age, although you cannot buy the year in which you reach SP age.
The SP is incredibly good value for money, but you do have to have the spare cash to buy the extra years, and then live at least 3 years for it to pay you back. After that it's all free money. And yes they may change the rules again, but the more people you piss off, the less likely you are to get re-elected, and pissing off (soon to be) pensioners is usually a bad idea.
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Luckily, 20 years ago, I invested in a pension which is doing very nicely now. She's sitting out the back with a cold drink. ;D
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I have 40 years of contributions. Apparently swmbo has 6 or 7. Might be worth her while paying to bring herself up to 10 years worth ?
Or will they move the goalposts again in a few years and throw the whole thing into confusion again ? :-\
Probably best answered in another thread - If admin want to split this stuff off then I've no objections. However, in the mean time....
You can each check your state pension entitlement here (though you have to register first) : https://www.gov.uk/check-state-pension
It is important you do this to see where you are at. The answer to your question is, as always, it depends.
For you - with 40 years NI I'm assuming you're in your 60's? If you were never contracted out into a private pension scheme then its still entirely possible to get £250+ of state pension per week by the time SERPS/S2P is taken into account. However, if you were contracted out for long periods (into an employer/private pension), then you might only be entitled to as little as £125 p/w. If the state pension checker says you are entitled to less than £165p/w then it may be worth YOU buying extra NI years. Each extra week costs £13.25, and entitles you to about £4.50 per week extra. It therefore only takes 3 years to break even. However, before you do anything, check what your current entitlement is. There are some gotchas where buying the wrong NI years do not increase your SP.
For SWIMBO - How old is she? - Check what she is currently entitled to. She'll get nowt unless she gets to 10 years NI contribs by her SP age. She should have got credits for looking after any kids (whilst claiming Child Benefit) up to age 14 IIRC. So if you've got any kids, then she should have more than 7 or 8 years (at least 14 plus 3 auto credits for 16-18)? If no kids, and assuming she's not up for popping another sprog at her time of life just to get the free NI credits :D, then yes it's almost certainly worth topping up her NI record. I believe she can buy any unpaid years back to 2006, so potentially she could add another 12 years. AIUI each additional year would cost around £700 and would be worth around £4.50 per week extra pension. She can also buy any years between now and when she reaches her SP age, although you cannot buy the year in which you reach SP age.
The SP is incredibly good value for money, but you do have to have the spare cash to buy the extra years, and then live at least 3 years for it to pay you back. After that it's all free money. And yes they may change the rules again, but the more people you piss off, the less likely you are to get re-elected, and pissing off (soon to be) pensioners is usually a bad idea.
Im almost 59, started work at 16. I was contracted in and out of SERPS, as pensions advice in the 90,s was like doing the hokey cokey in that regard. I will look into the whole thing in the near future, as it might be important in the future, if I live long enough.
My gut feeling is that even with company pension added onto the state pension, Im not going to be retiring at normal age and booking up a series of round the world cruises.. ;)
Hence the intention to work as long as Im able to, which will hopefully be past retirement age.
Im not going to mention swmbos age online or any talk of me drawing a pension in future will be rendered pointless. ;D ;D
Have just been talking about it though, and she intends to look into the whole thing too.
Thanks for the info. :y
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I only started a pension when I joined Sky, around 3 years after I graduated. This December will be my 9th year of the pension, I've been contributing 8% of my salary and Sky also put in 8%. With a family to support, I can't see myself increasing these contributions for a while. I think 16% combined is about average? :-\
They have dropped it for newbies though, they only contribute 6% now.
Don't plan on leaving Sky any time soon, unless Comcast have different ideas. ;D
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They have dropped it for newbies though, they only contribute 6% now.
Still better than here - 5% match for us. I was putting in 12% with 5% from the employer for a total of 17%, and that's really about all I can afford with a mortgage and giant tax bill. A friend of mine was putting in something like 30%, but his employer matched 10% IIRC; he'll retire a long time before me!
In fact, due to the constant tax hikes, I've had to drop mine to 5% + 5% for a while.. I *could* be more tax effective by increasing my contribution enough to drop me out of the tax band I'm in, as I'd get effectively 60% tax relief - and now LCOG will be able to figure out how much I earn, I'm sure - but I'd still be sacrificing take-home salary, so it's not an option for now.
I'll probably be at my desk at 5pm on the day of my 2pm funeral, anyway.
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Im almost 59, started work at 16. I was contracted in and out of SERPS, as pensions advice in the 90,s was like doing the hokey cokey in that regard. I will look into the whole thing in the near future, as it might be important in the future, if I live long enough.
As it turns out, virtually everyone who will reach SP age after about 2024 would have been better off contracted out of SERPS for as long as it was possible (2012 for most). But the advice in the mid noughties was to contract back in in your mid 40's. I contracted back into SERPS in 2006-7. The advice to do so was correct given the rules at the time, but the subsequent change to the new state pension meant that I would have been better off sticking it out till the very end. However, the big losers were those who never contracted out. They will only get £164 p/w, whereas those that did opt out will get £164 p/w plus whatever their SERPS opt-out pension (ex-protected rights) provides - mine should be close to an extra £80 p/w from age 55.
My gut feeling is that even with company pension added onto the state pension, Im not going to be retiring at normal age and booking up a series of round the world cruises.. ;)
Hence the intention to work as long as Im able to, which will hopefully be past retirement age.
In very general terms, it is usually worth paying in whatever you need to in order to get your full company match. Otherwise you're turning down free money. The really big mistake people make is delaying making meaningful contributions to a pension till they're 40 or 50, and concentrating on paying off the mortgage instead. For most it is MUCH more profitable to keep the mortgage big on low (2-3%) interest rate, and pay as much as you can into a pension, reclaiming the tax (20/40% uplift) and aim for the investments to return 5%+ tax free.
In rough terms, every 10 years delay you make in starting meaningful contributions doubles the amount you have to pay in per year later on. If a 20 year old pays in £100 per month, then to get to the same target a 30 year old must pay in £200 p/m, a 40 year old £400p/m and a 50 year old £800p/m.
Im not going to mention swmbos age online or any talk of me drawing a pension in future will be rendered pointless. ;D ;D
Have just been talking about it though, and she intends to look into the whole thing too.
Thanks for the info. :y
Fair enough, and just remember that if you should shuffle off this mortal coil she inherits your entire private pension tax free.
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I only started a pension when I joined Sky, around 3 years after I graduated. This December will be my 9th year of the pension, I've been contributing 8% of my salary and Sky also put in 8%. With a family to support, I can't see myself increasing these contributions for a while. I think 16% combined is about average? :-\
They have dropped it for newbies though, they only contribute 6% now.
Don't plan on leaving Sky any time soon, unless Comcast have different ideas. ;D
Not really any such thing as an average, but 8% match is very good and it would be foolish to turn down free money whilst it is avaliable. However, to put 16% into context, a final salary pension such as those enjoyed by Teachers (hello Stemo :y) Firemen, Nurses, Police etc is generally believed to be 'worth' between 25% and 35% of salary.
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They have dropped it for newbies though, they only contribute 6% now.
Still better than here - 5% match for us. I was putting in 12% with 5% from the employer for a total of 17%, and that's really about all I can afford with a mortgage and giant tax bill. A friend of mine was putting in something like 30%, but his employer matched 10% IIRC; he'll retire a long time before me!
In fact, due to the constant tax hikes, I've had to drop mine to 5% + 5% for a while.. I *could* be more tax effective by increasing my contribution enough to drop me out of the tax band I'm in, as I'd get effectively 60% tax relief - and now LCOG will be able to figure out how much I earn, I'm sure - but I'd still be sacrificing take-home salary, so it's not an option for now.
I'll probably be at my desk at 5pm on the day of my 2pm funeral, anyway.
If you're saying what it sounds like you're saying (personal allowance reduction?) then you need (paid for) professional financial advice from an IFA, not the ramblings of some nutters on an obsolete car forum. :o
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15% into retirement is a reasonable target whilst paying the house off. Once that's taken care of, you can live a little and invest the rest to bolster the pot :y Not sensible to rely on someone else to manage your entire pension... So whatever the match is, you should be putting the balance into a different pot... So with an 8% match, you should take that and invest a further 8% elsewhere... If the match is 3%, then you would be setting aside a further 12%...
Should I be made permanent at current job, then I believe they are paying an 8% match, which is nice... And should see me right if I give them all 25 years until I retire. Currently putting £45 a month into a personal stakeholder pension, plus a couple small pensions from previous employment.
Am pondering combining all except the new contributions into a single pot. Once I can afford to, I intend to at least quadruple the £45 and invest it carefully in a variety of growth funds, the idea being that it compounds into a decent sized pot which will enable me to draw down without killing the goose...
The tricky bit is trying to get a feel for a reasonable annual income in 25+ years time...
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I only started a pension when I joined Sky, around 3 years after I graduated. This December will be my 9th year of the pension, I've been contributing 8% of my salary and Sky also put in 8%. With a family to support, I can't see myself increasing these contributions for a while. I think 16% combined is about average? :-\
They have dropped it for newbies though, they only contribute 6% now.
Don't plan on leaving Sky any time soon, unless Comcast have different ideas. ;D
Not really any such thing as an average, but 8% match is very good and it would be foolish to turn down free money whilst it is avaliable. However, to put 16% into context, a final salary pension such as those enjoyed by Teachers (hello Stemo :y) Firemen, Nurses, Police etc is generally believed to be 'worth' between 25% and 35% of salary.
But is it to be believed?
Also teachers salary’s lower than technology area, so it’s anyone guess as to final value in cash terms.
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I think my lot give 8% even if I put in only 6%. I think, but would have to check, that I'm putting in 10%.
I feel its no enough, and the projection tools seem to imply its likely to be insignificant compared to SP :(
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Dad retired at 60 with a £16,500 final salary teachers pension.
Mum medically retired earlier with full final salary teachers pension. Her pension is at least a third higher than Dad's was as she had a much better job...
Iirc, equates to 65% of final salary.
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Depends what you want / feel you need from life after retirement. If your on a decent salary now, you may not need as much after retirement, depending on your plans.
Mortage finished, kids grown up - although that often doesn't stop the bank of parents scenario nowadays - possibly less expenses relating to travel, car usage etc, downsize to a bungalow so you can get to the toilet before pissing yourself.....
Personally, I cant stand the thought of sitting around the house not knowing what to do with myself, all day every day, but some people would love nothing more than to spend every waking hour doing the stuff in the garden that gardeners do, or decorating the bathroom every six weeks. ::) :o
Different strokes for different folks etc..
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I only started a pension when I joined Sky, around 3 years after I graduated. This December will be my 9th year of the pension, I've been contributing 8% of my salary and Sky also put in 8%. With a family to support, I can't see myself increasing these contributions for a while. I think 16% combined is about average? :-\
They have dropped it for newbies though, they only contribute 6% now.
Don't plan on leaving Sky any time soon, unless Comcast have different ideas. ;D
Not really any such thing as an average, but 8% match is very good and it would be foolish to turn down free money whilst it is avaliable. However, to put 16% into context, a final salary pension such as those enjoyed by Teachers (hello Stemo :y) Firemen, Nurses, Police etc is generally believed to be 'worth' between 25% and 35% of salary.
Final salary pension for teachers finished in April 2015. Now a career average. NPA for wifey was 60, now 67. She used to contribute 6.25% of her salary into her pension, in order to retire at 60. She now contributes 12.5% of her salary to retire at 67.
Not so 'gold plated' as it used to be.
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Depends what you want / feel you need from life after retirement. If your on a decent salary now, you may not need as much after retirement, depending on your plans.
Mortage finished, kids grown up - although that often doesn't stop the bank of parents scenario nowadays - possibly less expenses relating to travel, car usage etc, downsize to a bungalow so you can get to the toilet before pissing yourself.....
Personally, I cant stand the thought of sitting around the house not knowing what to do with myself, all day every day, but some people would love nothing more than to spend every waking hour doing the stuff in the garden that gardeners do, or decorating the bathroom every six weeks. ::) :o
Different strokes for different folks etc..
As long as you have an Omega, you'll have plenty to do. ;D
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As long as Im able to do the fettling on it I will be happy enough. This is a genuine concern for me, as Im not the fittest healthiest bloke around now, so old age could be a problem.
Im due a knee joint replacement when Im a bit older, which will hopefully help matters in that respect. Im at a bit of a loss as how best to get fit again, as running, or even longish walks are out of the question.
Swimming might be the best option, but I hate it. Its so fickin boring.
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Whist drives? Combines playing cards with driving as far as I can make out. Perfect Migv6 ;D
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Far cough. :P ;D...……...funnily enough, I drive to an old working mens c,ub on Tues. nights and sit with blokes who are playing crib.
I have no clue how this game works, nor the slightest desire to find out. ::)
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With a painful right knee, I find cycling okayish, walking okay if the weather is warmish and dryish. I was told keeping up leg muscle strength would help support the knee and reduce the pain. Running any distance because of the landing shock on the knee joints is a big no, no, plus if we were meant to run everywhere, why would we have bikes and motorbikes. :y :y :y
Retiring has never interested me, although I have got several pensions of varying amounts.
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Are you the responsible adult then?
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Final salary pension for teachers finished in April 2015. Now a career average. NPA for wifey was 60, now 67. She used to contribute 6.25% of her salary into her pension, in order to retire at 60. She now contributes 12.5% of her salary to retire at 67.
Not so 'gold plated' as it used to be.
Not what it once was for sure. But if you wanted to buy those same benefits in the private sector, the cost would make your hair stand on end! :o
I'm not over concerned about pension ATM, we're focussing on housing just now and I figure I'll hit the LTA by late 50s in any case so no need to bust a gut on it.
SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
Iirc I've always done 5-7% with the same from the company.
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Not really any such thing as an average, but 8% match is very good and it would be foolish to turn down free money whilst it is avaliable. However, to put 16% into context, a final salary pension such as those enjoyed by Teachers (hello Stemo :y) Firemen, Nurses, Police etc is generally believed to be 'worth' between 25% and 35% of salary.
Final salary pension for teachers finished in April 2015. Now a career average. NPA for wifey was 60, now 67. She used to contribute 6.25% of her salary into her pension, in order to retire at 60. She now contributes 12.5% of her salary to retire at 67.
Not so 'gold plated' as it used to be.
I don't spend much time worrying about the TPS scheme, but, according to t'interweb the maximum TPS contribution rate is 11.7%? And depending how old she is, anyone who joined prior to 2012 and was over 50 then retains a retirement age of 60?
https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained/teachers-pensions-scheme-explained-az5106g8vnt7
Whilst I agree it's not as good as it once was, my point was that in order for a private sector employee to match one of the public sector schemes it's likely that they would have to put away an equivalent of about 30% of salary, every year, throughout their working lives. If employers contribute 5-8%, then the employee must contribute 22-25%. Auto-enrollment will eventually reach a minimum of 8% of salary - which frankly isn't enough.
Another rule of thumb is that you should contribute half your age when you start as a percentage of income, and uprate it yearly for inflation. So a 20 year old needs to contribute 10% of income, a 30 year old 15%, a 40 year old 20% etc. These percentages include employer contributions, so if you start at 20 years old and have an employer that does a 5% match then your total is 10% so you should be Ok. However, if you leave it till you're 40, then you need to find an employer who'll do a 10% match - if they only offer a 5% match then you'll need to contribute 15% yourself.
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I stand corrected, Malcolm, it is 11.7%. She can take any pension accrued before April 2015 at age 60, but as far as I know, anything accrued after that is not available until she's at SPA. I'll have a look at the link you posted.
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She's a 'transition member' so I think my first assumption was right.
She's 47 now, BTW.
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SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
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Tell me, Malcolm, should you stop contributing once you reach your LTA?
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Just been on the TP website and looked at the forecasts. No matter which way it goes, with no mortgage to pay and no more pension contributions to make, she will be 'ok' at 60 and fickin minted at 67. ;D
I'm obviously a bit out of my depth when trying to work out the in and outs, so the above statement is enough to be going on with.
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Tell me, Malcolm, should you stop contributing once you reach your LTA?
Good question and one that you should seek professional (paid for) advice on. ::)
My view is that if you've got a pension pot predicted to be greater than £1M then you probably should NOT contribute any more of your own money to it unless there is some sort of employer match of contributions - don't turn down free money. A £1M pot should produce a tax free lump sum of £250K and yearly income of at least £25K p/a, and possibly up to £40K p/a if well managed. Once you add in the state pension at SP age, you'll be getting quite close to the 40% tax band. Any excess above the LTA is 'taxed' at 25%, and then the remainder subject to income tax (so likely 40%) making the total tax rate 55% (1- (0.75 x 0.6)). There ain't no point in paying 55% tax on the way out unless you can save more than 55% on the way in.
If there is no employer match on contributions, then VCT's, Stocks and Shares ISA's, or even unwrapped investments would be my preferred options. Or you could live a little and buy an Omega to fettle - it might turn into a valuable investment (before it turns to rust)
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All this pension chat made me log into the towers watson company that Sky use, scary looking at their calculators, I think I will increase my contributions if I can afford to this year.
As only 'strong' investments will meet my target pension salary, need to increase contributions so only the 'average' investments meet the target.
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Arrghhhh . . . . . . Not read all of the post. I just saw the subject and realized that it would be a minefield, just like pensions themselves.
Best thing I ever did was stay in London starting with a crappy little flat when all my mates were getting nice 3 bed semis well out of London. And, then move back to Wales.
Even with money in sitting pension funds I can't figure out the best thing to do. Seem to get screwed regardless, tax, fees whatever.
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SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.
I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! :y
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Arrghhhh . . . . . . Not read all of the post. I just saw the subject and realized that it would be a minefield, just like pensions themselves.
So ask some questions and try to understand the answers. Burying your head in the sand could leave you at the mercy of the state, living on benefits in old age.
Even with money in sitting pension funds I can't figure out the best thing to do. Seem to get screwed regardless, tax, fees whatever.
There is no tax on monies you pay into a pension pot - in-fact the govt boosts it up by 25%. There is no tax on the assets/funds contained in the pension pot as it (hopefully) grows. Then when you come to draw it out again (at age 55 or older), 25% of your pot can be taken tax free, and the remainder taken as income, taxed at whatever your tax rate is. You have a personal tax free allowance - currently £11850 - so you can draw out £11850 tax free between age 55 and 67. At 67 your state pension will start giving you an additional £8K+ income. This means you can continue to draw an additional £3K ish from the private pension making a total of £11850 still - and still all tax free.
If you want to take more than £11850 total per annum, then you're going to be paying income tax (at 20%) on everything above the £11850.
There will be fees though - the pension companies have to be paid somehow. You do want to keep these as small as possible. It's possible to get fees down to less than 0.3% per year, though it does depend on what you invest in. You shouldn't be paying more than about 1% though unless you're investing in something very specialised.
Whatever size of 'pot' you build, it should be possible to take an income of somewhere between 3%-4% per annum from it without you risking it running out before you die. Therefore if you want to draw £20K per year in retirement (including £8K state pension), then you need to build a pot of around £400K-£500K. The sooner you start the sooner you'll get there. If you never start, then sooner or later you'll have to get used to living on the £8K state pension alone.
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See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.
I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! :y
In simple terms. Suppose SWIMBO's company makes £1K gross profit. There are 3 (legal) ways of getting the money out of the company and into her 'pocket'.
1) Salary. Employers NI is 13.8%, Employees NI is 12% and Income tax is 20%. So once all that is paid, from the original £1000 she only gets about £620 in her pocket.
2) Dividends. Corporation tax is 20%, and personal dividend tax is 7.5%. Once that is paid, she gets £740 in her pocket.
3) Pension. No taxes - all £1000 can go straight into the pension.
It's a bit more complicated than that since NI, Income Tax and Dividend Tax have various allowances and limits, but that's the jist of it.
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SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
That assumes she is not subject to the money purchase annual allowance and does not and has not for the carry forward years had adjusted income above £150k else the reduced annual allowance applies
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See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.
I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! :y
In simple terms. Suppose SWIMBO's company makes £1K gross profit. There are 3 (legal) ways of getting the money out of the company and into her 'pocket'.
1) Salary. Employers NI is 13.8%, Employees NI is 12% and Income tax is 20%. So once all that is paid, from the original £1000 she only gets about £620 in her pocket.
2) Dividends. Corporation tax is 20%, and personal dividend tax is 7.5%. Once that is paid, she gets £740 in her pocket.
3) Pension. No taxes - all £1000 can go straight into the pension.
It's a bit more complicated than that since NI, Income Tax and Dividend Tax have various allowances and limits, but that's the jist of it.
What about using an MVL and claiming entrepreneur allowance?
And 3 misses the point that normally 75% of the fund is drawn and taxed as income. So taking that into account if you could use the MVL and entrepreneur allowance that might be better
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She's a 'transition member' so I think my first assumption was right.
She's 47 now, BTW.
Your wife is 20 years younger than you ? !! You old devil you. :o ;D
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If you're saying what it sounds like you're saying (personal allowance reduction?) then you need (paid for) professional financial advice from an IFA, not the ramblings of some nutters on an obsolete car forum. :o
That is indeed what I'm saying (in fact, my allowance is now roughly negative £8000) - I went to see a local tax advisor whose advice was (in summary):
"You're a PAYE employee, so you're screwed. You could salary sacrifice, but you'll still take home less each month."
Thankfully he didn't charge me for that advice...
Still, I went to bed last night as my employer announced 230 redundancies (~5%) worldwide and, internally, sent an email that read (I'm paraphrasing): "We are making 230 people redundant across all departments, and closing our Lowell office. Those affected will find out soon, and those affected in EMEA will find out in the next few weeks"
Which I thought was a thoroughly shitty way to tell people!
So y'know. Maybe my salary will drop to 0 soon. Maybe it won't. I get to play a fun waiting game!
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If it makes you feel better, I may be taking my current (agency) employer to the Small Claims Court...
The long and the short of it being that they are meant to send a third party payroll company my gross income plus their liabilities. They have 'forgotten' to do this and expect me to pay Employer NI etc. Last two pay slips were £82 short each. Find out today if they have finally 'remembered'.
They also neglected to pay me for my Induction... :-X
Am still waiting for the link to a feedback website for my leaving interview for my previous job. They obviously care just as much as I expected them to ;D
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If you're saying what it sounds like you're saying (personal allowance reduction?) then you need (paid for) professional financial advice from an IFA, not the ramblings of some nutters on an obsolete car forum. :o
That is indeed what I'm saying (in fact, my allowance is now roughly negative £8000) - I went to see a local tax advisor whose advice was (in summary):
"You're a PAYE employee, so you're screwed. You could salary sacrifice, but you'll still take home less each month."
Thankfully he didn't charge me for that advice...
Still, I went to bed last night as my employer announced 230 redundancies (~5%) worldwide and, internally, sent an email that read (I'm paraphrasing): "We are making 230 people redundant across all departments, and closing our Lowell office. Those affected will find out soon, and those affected in EMEA will find out in the next few weeks"
Which I thought was a thoroughly shitty way to tell people!
So y'know. Maybe my salary will drop to 0 soon. Maybe it won't. I get to play a fun waiting game!
Bummer. However, I'd still be making hay whilst the sun shines. It only costs you £40 from your pocket to put £100 into your pension. If the govt are stupid enough to come up with these daft effective marginal rates, then you may as well take advantage of them. Your future self will thank you.
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SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
That assumes she is not subject to the money purchase annual allowance
She can't be subject to that unless she is 55 or older, and the OP said "Instead we'll use that in our 50's ...", so I assume she'd not yet 50. Assumptions are dangerous though.
....and does not and has not for the carry forward years had adjusted income above £150k else the reduced annual allowance applies
True, but I did also say "See an accountant. Tomorrow. Or sooner if possible." IMV anyone with a salary approaching £100K should be paying for professional advice on how to legally minimise their tax liabilities.
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See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.
I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! :y
In simple terms. Suppose SWIMBO's company makes £1K gross profit. There are 3 (legal) ways of getting the money out of the company and into her 'pocket'.
1) Salary. Employers NI is 13.8%, Employees NI is 12% and Income tax is 20%. So once all that is paid, from the original £1000 she only gets about £620 in her pocket.
2) Dividends. Corporation tax is 20%, and personal dividend tax is 7.5%. Once that is paid, she gets £740 in her pocket.
3) Pension. No taxes - all £1000 can go straight into the pension.
It's a bit more complicated than that since NI, Income Tax and Dividend Tax have various allowances and limits, but that's the jist of it.
What about using an MVL and claiming entrepreneur allowance?
That's shutting the company down, and paying 10% tax on any resultant capital gain? Not much use for an on-going company?
And 3 misses the point that normally 75% of the fund is drawn and taxed as income. So taking that into account if you could use the MVL and entrepreneur allowance that might be better
Again, this falls into the take professional (paid for) advice category. If you're a basic rate (20%) tax payer in retirement (income less than £45K ish) then the 25% tax free means the effective tax rate is 15% on pension income - and that's after you've used up all you 0% personal allowance (£11850). If you're a 40% or higher rate tax payer now, then £11850 @ 0% and 15% on the remainder on the way out is pretty good compared to 40% on the way in. And if you take into account 2% eeNI and 13.8% erNI it's more like 55% saving on the way in.
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Bummer. However, I'd still be making hay whilst the sun shines. It only costs you £40 from your pocket to put £100 into your pension. If the govt are stupid enough to come up with these daft effective marginal rates, then you may as well take advantage of them. Your future self will thank you.
I just can't afford to (take an effective drop in take-home) at the moment, but once I dispose of some liabilities, that's exactly what I'll do.. crank up the salary sacrifice as far as I can.
Y'know, assuming I still have a job! ;D :-X
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Fortunately I took the advice of an employer when very young, " make sure you have a good pension"so have forces pension NHS pension ,+ civil service pension from HMPS so will be fine wifey has her state pension + her one from 30 years in education , my advice nowadays would be put your money into property nowadays rather than into a private pension, we did this with an inheritance in 1987 & have never been better off financially.
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SWMBO has her own company so not much advantage in stacking her pension. Instead we'll use that in our 50's to make sure we don't pay any (or much) tax on income in our later middle age.
See an accountant. Tomorrow. Or sooner if possible.
Pension contributions from a company are an allowable business expense. They come off the 'profit' before any corporation tax. You can dump up to £40K of profit into her pension plan per year tax free, and carry forward the past 3 years allowance too. So she could extract up to £160K of profit from the company into her pension scheme tax free. There is no cheaper way to extract money from the company, or fund her retirement.
To be fair, I wasn't aware of that, but while ever we aren't making my pension to £40k p.a. I think it would be better to add more to mine. My effective rate is 40%, plus some NI, hers rather less. SWMBO'S Company runs about £45k as PBT and sadly, we need all of it ATM.
I scraped my ACA tax exams, so as soon as we have any spare income, I can assure you I'll be seeking some good advice! :y
Something else to consider. You both have a 0% personal allowance of (currently) £11850. If/when you get to 55 and decide you've had enough and want to retire then it is poor planning for one partner to have all the pension income. Take the following scenarios...
1) You have a big pension pot (£1M) and SWIMBO has zero. You take out (say) £40K per year. £11850 is tax free, the rest taxed at 20%, so you'll pay £5630 in tax.
2) You both have similar pension pots (£500K each). You both take out (say) £20K per year. £11850 each is tax free, the rest taxed at 20%, so you pay £1630 tax each, £3260 total.
If you want to retire before state pension age (67..70?) you should try to ensure that SWIMBO's pension pot is big enough to produce a sustained minimum of £11850 per year so that she uses all her tax free personal allowance in retirement. That means the pot size needs to be about £300K if you both want that world cruise at 55. At 67-70 the state pensions kick in so you can then adjust things, and live a life of luxury (and pray comrade Korbyn doesn't get in).
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
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Fortunately I took the advice of an employer when very young, " make sure you have a good pension"so have forces pension NHS pension ,+ civil service pension from HMPS so will be fine wifey has her state pension + her one from 30 years in education, my advice nowadays would be put your money into property nowadays rather than into a private pension, we did this with an inheritance in 1987 & have never been better off financially.
Common mistake. Illiquid asset, high running costs, heavily taxed, lower returns than the stock market.
You need somewhere to live, so yes buy a house you're happy to live in. But there are better, safer ways of making more money.
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
They'll do that anyway if they get divorced. Starting point is a 50-50 split of all assets including pensions.
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What are your thoughts on Mutual funds?
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Fortunately I took the advice of an employer when very young, " make sure you have a good pension"so have forces pension NHS pension ,+ civil service pension from HMPS so will be fine wifey has her state pension + her one from 30 years in education, my advice nowadays would be put your money into property nowadays rather than into a private pension, we did this with an inheritance in 1987 & have never been better off financially.
Common mistake. Illiquid asset, high running costs, heavily taxed, lower returns than the stock market.
You need somewhere to live, so yes buy a house you're happy to live in. But there are better, safer ways of making more money.
.
Not my experience, but maybe I am just lucky mortgage free by 33 years of age & in the process of buying our 5th property for cash..
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Not my experience, but maybe I am just lucky mortgage free by 33 years of age & in the process of buying our 5th property for cash..
Jeebus! Teach us your ways, oh master?
(Not even kidding, although I know precisely where I've been going very wrong for a great number of years, I still can't imagine being mortgage free by 33.. that's 6 years ago ;D)
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
They'll do that anyway if they get divorced. Starting point is a 50-50 split of all assets including pensions.
This has been discussed as a useful way to move pension savings ( and avoid3% stamp on a second house if the rules don't Change),
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
They'll do that anyway if they get divorced. Starting point is a 50-50 split of all assets including pensions.
This has been discussed as a useful way to move pension savings ( and avoid3% stamp on a second house if the rules don't Change),
Divorce? That seems extreme! ;)
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Not my experience, but maybe I am just lucky mortgage free by 33 years of age & in the process of buying our 5th property for cash..
Jeebus! Teach us your ways, oh master?
(Not even kidding, although I know precisely where I've been going very wrong for a great number of years, I still can't imagine being mortgage free by 33.. that's 6 years ago ;D)
.
All started by moving from South London to Norfolk in 1987 all simple sell high buy low improve & sell again did everything at the right time made a lot of cash but could have done even better looking back, but still in a very good position now. It just gave a buzz making a profit so easily & still does our latest one needs around £15,000 spending on it will easily be worth £40- £45,000 more within months but it has my dream double garage at last so may stay put maybe 😉
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
They'll do that anyway if they get divorced. Starting point is a 50-50 split of all assets including pensions.
This has been discussed as a useful way to move pension savings ( and avoid3% stamp on a second house if the rules don't Change),
Divorce? That seems extreme! ;)
Until death or income tax...
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Fortunately I took the advice of an employer when very young, " make sure you have a good pension"so have forces pension NHS pension ,+ civil service pension from HMPS so will be fine wifey has her state pension + her one from 30 years in education, my advice nowadays would be put your money into property nowadays rather than into a private pension, we did this with an inheritance in 1987 & have never been better off financially.
Common mistake. Illiquid asset, high running costs, heavily taxed, lower returns than the stock market.
You need somewhere to live, so yes buy a house you're happy to live in. But there are better, safer ways of making more money.
.
Not my experience, but maybe I am just lucky mortgage free by 33 years of age & in the process of buying our 5th property for cash..
Mortgage free? Borrowing money at sub 2% interest rates for the past 10 years, and investing it into the stock market which has averaged 7.2% growth per year over the past 30 years?
More than 1 Property. So 6% Stamp Duty and Solicitors fees on the way in, Council tax and Insurance running costs, Rental income taxed @ 40%, and CGT @ 20% on the way out. Plus tenants, and probably letting agent fees.
I'll pass thanks.
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Ah, but what if they split the income into two pension pots, and then they get divorced?
</eternal pessimist>
They'll do that anyway if they get divorced. Starting point is a 50-50 split of all assets including pensions.
This has been discussed as a useful way to move pension savings ( and avoid3% stamp on a second house if the rules don't Change),
Divorce? That seems extreme! ;)
HMRC can challenge this kind of contrived tax evasion. Divorce is expensive enough without fighting off HMRC.
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All started by moving from South London to Norfolk in 1987 all simple sell high buy low improve & sell again did everything at the right time made a lot of cash but could have done even better looking back, but still in a very good position now. It just gave a buzz making a profit so easily & still does our latest one needs around £15,000 spending on it will easily be worth £40- £45,000 more within months but it has my dream double garage at last so may stay put maybe 😉
Definitely sounds like you started at the right time ('87, pre crash IIRC?).. and buying power in Lincs is immense; there was a property that tempted me (four garages, lots of land) but the fact that it was in the arse end of nowhere and had <2Mbit internet put me off ;D
It was dirt cheap, though.
More than 1 Property. So 6% Stamp Duty and Solicitors fees on the way in, Council tax and Insurance running costs, Rental income taxed @ 40%, and CGT @ 20% on the way out. Plus tenants, and probably letting agent fees.
I'll pass thanks.
Must admit I'm tempted to get out of the game - I have one property ("accidental landlord") and a high income so I am prime for a kicking by the tax man at every turn, and it's going to start costing me money in real terms (~£7k p/a in tax) as the income (£1750/mo) less mortgage (£1150/mo) doesn't cover the tax liability.
It has gone up in value, though, and I'm still at the point where I won't get bent over too badly on CGT (only let for part of ownership), so I could realise enough cash to clear half our mortgage on the property we live in.. which would make things much more comfortable.
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Fortunately I took the advice of an employer when very young, " make sure you have a good pension"so have forces pension NHS pension ,+ civil service pension from HMPS so will be fine wifey has her state pension + her one from 30 years in education, my advice nowadays would be put your money into property nowadays rather than into a private pension, we did this with an inheritance in 1987 & have never been better off financially.
Common mistake. Illiquid asset, high running costs, heavily taxed, lower returns than the stock market.
You need somewhere to live, so yes buy a house you're happy to live in. But there are better, safer ways of making more money.
.
Not my experience, but maybe I am just lucky mortgage free by 33 years of age & in the process of buying our 5th property for cash..
Mortgage free? Borrowing money at sub 2% interest rates for the past 10 years, and investing it into the stock market which has averaged 7.2% growth per year over the past 30 years?
More than 1 Property. So 6% Stamp Duty and Solicitors fees on the way in, Council tax and Insurance running costs, Rental income taxed @ 40%, and CGT @ 20% on the way out. Plus tenants, and probably letting agent fees.
I'll pass thanks.
.
And I will live very comfortably glad I took a chance when I was young.
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She's a 'transition member' so I think my first assumption was right.
She's 47 now, BTW.
Your wife is 20 years younger than you ? !! You old devil you. :o ;D
18 years younger! What do you think I am? Some kind of paedophile? ;D
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Must admit I'm tempted to get out of the game - I have one property ("accidental landlord") and a high income so I am prime for a kicking by the tax man at every turn, and it's going to start costing me money in real terms (~£7k p/a in tax) as the income (£1750/mo) less mortgage (£1150/mo) doesn't cover the tax liability.
It has gone up in value, though, and I'm still at the point where I won't get bent over too badly on CGT (only let for part of ownership), so I could realise enough cash to clear half our mortgage on the property we live in.. which would make things much more comfortable.
Best read this then :
https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782
You won't be able to deduct mortgage costs soon either.
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Reading this thread has made me realise one thing, at least. A decent accountant a very good investment.
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Must admit I'm tempted to get out of the game - I have one property ("accidental landlord") and a high income so I am prime for a kicking by the tax man at every turn, and it's going to start costing me money in real terms (~£7k p/a in tax) as the income (£1750/mo) less mortgage (£1150/mo) doesn't cover the tax liability.
It has gone up in value, though, and I'm still at the point where I won't get bent over too badly on CGT (only let for part of ownership), so I could realise enough cash to clear half our mortgage on the property we live in.. which would make things much more comfortable.
Best read this then :
https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782
You won't be able to deduct mortgage costs soon either.
Already aware of that one - that's why it'll start costing £7k p/a in tax ;) Right now it just about covers it's own tax liability (75% offset for last tax year).. actually it should be just less than £7k due to the tax credit, but even so, it'll still cost money in real terms which makes it a worthless investment (besides capital increase, which I suspect is going to stagnate now)
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Must admit I'm tempted to get out of the game - I have one property ("accidental landlord") and a high income so I am prime for a kicking by the tax man at every turn, and it's going to start costing me money in real terms (~£7k p/a in tax) as the income (£1750/mo) less mortgage (£1150/mo) doesn't cover the tax liability.
It has gone up in value, though, and I'm still at the point where I won't get bent over too badly on CGT (only let for part of ownership), so I could realise enough cash to clear half our mortgage on the property we live in.. which would make things much more comfortable.
Best read this then :
https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-atnsv0j6j782
You won't be able to deduct mortgage costs soon either.
Already aware of that one - that's why it'll start costing £7k p/a in tax ;) Right now it just about covers it's own tax liability (75% offset for last tax year).. actually it should be just less than £7k due to the tax credit, but even so, it'll still cost money in real terms which makes it a worthless investment (besides capital increase, which I suspect is going to stagnate now)
It's yours once the mortgage is paid, though.
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It's yours once the mortgage is paid, though.
Ah, did I not mention the BTL is on an interest only mortgage? :-X
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It's yours once the mortgage is paid, though.
Ah, did I not mention the BTL is on an interest only mortgage? :-X
Might be a while then... ::)
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It's yours once the mortgage is paid, though.
Ah, did I not mention the BTL is on an interest only mortgage? :-X
A friend of mine has a few flats on BTL interest only. His mortgage is 0.25% over base for the lifetime of the mortgage. Funnily enough, he's never short of a mortgage advisor offering him a "better deal".
Divorce? That seems extreme! ;)
I prefer the word, efficient ;)
HMRC can challenge this kind of contrived tax evasion. Divorce is expensive enough without fighting off HMRC.
We don't mention that particular e-word. And I would imagine its rather hard to challenge, hypothetically speaking. Unless the people involved were really rather stupid in the way they conducted their affairs. ::)
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Reading this thread has made me realise one thing, at least. A decent accountant a very good investment.
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Another very good piece of advice I took at an early age, had two Jewish employers when I first got part time jobs around 15 years of age, two extremely wise & wealthy men.
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It's yours once the mortgage is paid, though.
Ah, did I not mention the BTL is on an interest only mortgage? :-X
I see......... :-\
As you were, chaps. ;D
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FWIW, my take on BTL property is it makes a good long term investment but doesn't fit the short-termist, model that some speculators had opted for up until recently.
Personally I aim to have a couple of properties at some point (depending on what value we sink into our current house) and I would view them as buying an annuity in the long term. Buying through a limited company that makes little or no money and get the mortgages paid off in c20-25yrs. At that point you have effectively "bought" an annuity, even handing the properties off to someone to fully manage you would still get solid returns compared to pretty much any other investment. Over that time horizon, the "buy in" costs become close to irrelevant and I wouldn't bother with an exit strategy really. Just hold them indefinitely.
All depends on mortgage rates obviously, but we haven't been building enough houses (pretty much) in my whole lifetime, so its a simple supply and demand issue in the medium term.
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FWIW, my take on BTL property is it makes a good long term investment but doesn't fit the short-termist, model that some speculators had opted for up until recently.
Personally I aim to have a couple of properties at some point (depending on what value we sink into our current house) and I would view them as buying an annuity in the long term. Buying through a limited company that makes little or no money and get the mortgages paid off in c20-25yrs. At that point you have effectively "bought" an annuity, even handing the properties off to someone to fully manage you would still get solid returns compared to pretty much any other investment. Over that time horizon, the "buy in" costs become close to irrelevant and I wouldn't bother with an exit strategy really. Just hold them indefinitely.
All depends on mortgage rates obviously, but we haven't been building enough houses (pretty much) in my whole lifetime, so its a simple supply and demand issue in the medium term.
But, you've got 6% (Stamp Duty) buy in costs, plus 20% of gains (CGT) sell up costs. You've got to make up close to 30% extra over putting your money in stocks and shares, which historically have averaged 7%+ return year on year, and get tax free status via either ISA or Pension.
And if bought through a ltd company, how do you get any cash out into your pocket? Salary attracts income tax (20%/40%), eeNI (12%/2%) and erNI (13.8%), whilst dividends attract corporation tax (20%) and dividend tax (7.5%/32.5%).
If you want to setup business as a landlord then fine go ahead. Just don't kid yourself that its a way to print money any more.
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I assume the 7% return y.o.y. is reinvesting dividends plus capital growth? If so then surely property would outperform on capital growth plus rental returns? House price growth has been about 7% y.o.y. in my lifetime.
And why is stamp duty 6%? Is it not 3% <£125k 5% £125k-250k and 8%/13% above that?
As you'll see from my last post, I wouldn't be bothered about CGT as there's no intention to sell, cash out would probably be via pension contributions. Nor would I claim its a licence to print money. Rather, its one part (along with pension and LISA contributions) that we intend to use to make early retirement (or "retirement" as most on here would know it :P) a reality.
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I assume the 7% return y.o.y. is reinvesting dividends plus capital growth?
Yes
If so then surely
Don't call me Shirley :)
Property would outperform on capital growth plus rental returns? House price growth has been about 7% y.o.y. in my lifetime.
Nett of tax? 7% HPI taxed at 6% on the way in and 20% on the way out = less than 5%.
And why is stamp duty 6%? Is it not 3% <£125k 5% £125k-250k and 8%/13% above that?
There has been an additional 3% Stamp duty for second/third/fourth homes since 2016
https://www.stampdutycalculator.org.uk/stamp-duty-second-homes.htm
As you'll see from my last post, I wouldn't be bothered about CGT as there's no intention to sell, cash out would probably be via pension contributions.
So you're putting a few £10K's 'rent' per year into a pension, over 10+ years, rather than putting £100K+ into the pension on day one? If you're expecting to get close to the LTA then that might work, but I doubt it. Would need very careful modelling.
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Oh - I was wrong. CGT is 28% on residential property, not 20% - for personal owners and can apply to companies.
https://www.gov.uk/capital-gains-tax/rates
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At the end of the day do what you feel right for you , we did very well out of our properties only starting with an £85,000 inheritance in 1986 sold our last two rentals last year for a very good profit so just have the one we are in which is almost sold & the one we should exchange on by Monday. Don't be taken in by facts & figures by " financial experts"as with anything plenty of con artists around.
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If so then surely
Don't call me Shirley :)
The old ones are still the best :P
So you're putting a few £10K's 'rent' per year into a pension, over 10+ years, rather than putting £100K+ into the pension on day one? If you're expecting to get close to the LTA then that might work, but I doubt it. Would need very careful modelling.
Not exactly. Starting with c £100k on day one (in a Ltd Company), I would buy and refurbish (probably most of the work paid for rather than done) a property to rent out. Mortgage it once I have enough history behind me to get a B2L mortgage (probably 12 months). Then rinse and repeat. By my reckoning, the uplift in value from renovation plus 1yrs rent should free up about all of the money I put in. Allowing for a repeat performance. By the time retirement rolls around, say 25yrs from now, the £100k in a ftse tracker should be worth about £575k, as should each house I've renovated. IMV, about 4 is the right number, should give a monthly income of around £2400 pcm in today's money. Only at that point does any money come out of the company. Up until that point it just gets reinvested into the ltd co. (or more likely covers the corporation tax).
So, overall not actually comparable as dumping £100k into a FTSE all share tracker is passive, this is active, but it reflects the options open to me, doesn't become a full time occupation and is actually something I quite enjoy. By my reckoning, starting with £100k today, I could buy an annuity of £24k in retirement (@60), or receive £29k from 4 houses, and then still have the houses left over. All for the cost of a little bit of effort in between. 8)
Plus, unlike an annuity, it would free us up for retirement in out mid 50's. I reckon that the private pension age will be well into the 60's by the time I get there. :y
At the end of the day do what you feel right for you.
Sounds about right :)
Oh - I was wrong. CGT is 28% on residential property, not 20% - for personal owners and can apply to companies.
Genuinely curious as to how this works? I understand if you sell a company to another person then you can pay CGT, same as selling shares outside of an ISA wrapper, but in terms of the ongoing business, AFAIK its corporatiion tax only :/
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I don't understand all this annuity stuff but, according to the teachers pension website, wifey has already built up an annual pension of £19000+ and can take a lump sum of circa £50K.
By the time she is 67, it says she will have accrued an annual pension of over £65K with the same lump sum.
This is assuming her annual salary rises to £90K over the 20 years she has left. That is a conservative estimate, I think.
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
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Not exactly. Starting with c £100k on day one (in a Ltd Company), I would buy and refurbish (probably most of the work paid for rather than done) a property to rent out. Mortgage it once I have enough history behind me to get a B2L mortgage (probably 12 months). Then rinse and repeat. By my reckoning, the uplift in value from renovation plus 1yrs rent should free up about all of the money I put in. Allowing for a repeat performance. By the time retirement rolls around, say 25yrs from now, the £100k in a ftse tracker should be worth about £575k, as should each house I've renovated. IMV, about 4 is the right number, should give a monthly income of around £2400 pcm in today's money. Only at that point does any money come out of the company. Up until that point it just gets reinvested into the ltd co. (or more likely covers the corporation tax).
Not sure where the initial £100K in the Ltd comes from though. If it comes from you, then paying £100K into a pension (ignoring the fact you probably can't do that!) it immediately becomes £125K (for a 20% taxpayer) or £166K (for a 40% tax payer). 25 years @ 7% growth it becomes £678K(20%) or £900K(40%). £678K might get you £20-£27K income per year. £900K might get you £35-£40K income per year.
Or you invest the money in the ltd company, and buy a house using £100K. That's £94K on the house, and £6K gone in stamp duty. The house value increases by 7% yoy for 25 years, and ends up at £510K. The company sells the house and pays 20% corp tax on the gain, leaving it with £427K. It then dumps the £427K into your pension.
In the mean time the company has had 25 years worth of rental income. What yield (net) are you aiming at? After letting fees, voids, insurance, accountancy fees, auditors, maintenance costs etc? 5% gives you less than £5K p/a. If the company pays all that into your pension plan for 25 years, at 7% yoy growth, you get to £330K. Add the £427K from the sale and you're at £757K.
In order to buy a second £100K house, you're going to have to find another £100K from somewhere. If you mortgage the first one you're only likely to get a BTL mortgage at decent rates with a 75% or better LTV. If you've tarted up the first house, it may now be valued at (say) £100K, so you can borrow £75K. Add the 5K rent and you've got 80K (but £5K less in your pension). Still 20K to find somewhere. No good waiting for the first house to increase in value so you can borrow more, because the second house will also have gone up. The second house will also be less profitable because you've got the mortgage to service - if the net yield is still 5%, but the mortgage rate is 2.5%, then you'll only be making £2.5K p/a on it.
Can it be made to work - yes. Would I do it - no.
Plus, unlike an annuity, it would free us up for retirement in out mid 50's. I reckon that the private pension age will be well into the 60's by the time I get there. :y
Govt have indicated they'll link minimum private pension age to state pension age minus 10. So if state pension age did go up to 70, then yes private pension age could go up to 60. Govt have committed to 10 years notice of any changes, but governments change and lie. You also don't need to buy an annuity - some drawdown schemes allow roughly twice the income the annuities provide, though with additional investment risk.
Oh - I was wrong. CGT is 28% on residential property, not 20% - for personal owners and can apply to companies.
Genuinely curious as to how this works? I understand if you sell a company to another person then you can pay CGT, same as selling shares outside of an ISA wrapper, but in terms of the ongoing business, AFAIK its corporatiion tax only :/
Not sure - it was something our accountant said. I think it refers to non ltd companies, partnerships and trusts.
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
I suppose it depends if people are willing to sacrifice their younger more healthy self for the 'possibility' they may live to a ripe old age and can afford the best care home. :)
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I don't understand all this annuity stuff but, according to the teachers pension website, wifey has already built up an annual pension of £19000+ and can take a lump sum of circa £50K.
By the time she is 67, it says she will have accrued an annual pension of over £65K with the same lump sum.
This is assuming her annual salary rises to £90K over the 20 years she has left. That is a conservative estimate, I think.
Final Salary / Average Salary / Defined Benefit schemes etc don't use annuities. The employer is committed to paying whatever it is they have promised in the contract. How they fund that is up to them, but there is (virtually) zero risk to the pensioner. With almost all the public sector schemes there is no 'pot' of money. It's already been pissed up the wall. The Govt will just tax future taxpayers more to pay whatever is required. So no need for Mrs Stemo to worry about annuities - she will get whatever the Govt has promised her.
Money Purchase / Defined Contribution / Private Pension schemes like what most mere mortals now have do pay money into a pot reserved for the employee. That pot may grow (or fall) depending what it's invested in. Hopefully it'll grow and reach a large value. Then when you retire you can 'cash in' your pot, take 25% tax free from it, and buy an annuity with the remaining 75%. When buying an annuity, in exchange for your money the annuity company promises to pay you an amount for however long you live, be that 1 day or 50+ years.
The amount they pay depends on your age, postcode, married/single, lifestyle, any illnesses, index linking and a gazillion other things. However, the annuity rates at the moment are pitifull - 2.5% ish for 55 year old, 3% escalation 50% joint life. So in exchange for a pot of (say) £100K they'll promise to pay you £2500 per year, increasing by 3% per year, and if you die they'll pay your partner £1250 till she dies. If you live to be 100 it'll be a good deal. If you and your wife die the day after you took out the annuity that's it - all the money is gone. The older you get, the better the annuity rates get. A 75 year old can get 5% on the same basis as the 55 year old above - statistically they won't live as long. Once the annuity is purchased and in payment, the contract is cast in stone - they must pay you. Neither you nor they can modify, revoke or surrender it. You no longer HAVE to buy an annuity though - other Drawdown options are available.
So just relax. Mrs Stem is in one of the best pension schemes there is, well off pension wise, and will be well minted before she retires. Just make sure she doesn't trade in her old 'Omega' for a newer model ::)
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'Omega'. Whadayermean?
As if I didn't fickin know ;D
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But...and it's a great big but....who knows what could happen between 'now' and 'then'.
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
I suppose it depends if people are willing to sacrifice their younger more healthy self for the 'possibility' they may live to a ripe old age and can afford the best care home. :)
.
Personally I have sacrificed zilch always had plenty of time with family when the kids were young good holidays cars & homes & intend to carry on like that God willing , although as we all know any of us could " wake up dead" tomorrow.
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
I suppose it depends if people are willing to sacrifice their younger more healthy self for the 'possibility' they may live to a ripe old age and can afford the best care home. :)
Thankfully in our case none of the above will involve much sacrifice beyond working in full time employment. No kids and no prospect or desire to have any. :y
Once the mortgage is paid off, I think about £75k pa will give us the kind of retirement I want. So then it becomes a game of trying to move that retirement as near to tomorrow as is feasible, while, as you say not making so many sacrifices as to make the time I. Between a drudge.
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
I suppose it depends if people are willing to sacrifice their younger more healthy self for the 'possibility' they may live to a ripe old age and can afford the best care home. :)
.
Personally I have sacrificed zilch always had plenty of time with family when the kids were young good holidays cars & homes & intend to carry on like that God willing , although as we all know any of us could " wake up dead" tomorrow.
Yeah. Nice to know your family will be OK though.
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But...and it's a great big but....who knows what could happen between 'now' and 'then'.
And that's the biggy, just said goodbye to a dear friend who was only 44,left a husband and two teenagers,need to live life now because who knows what tomorrow brings :-X
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Hmmm. Jimmy.
You have far too much interest in pensions for a younger man. This is not a healthy state of affairs. I don't have one but I'll be fine. :y
Stop stressing over when you're old and senile, and enjoy yourself instead: ;) ;)
https://www.youtube.com/watch?v=fW280u2pbIw (https://www.youtube.com/watch?v=fW280u2pbIw)
Never too early to start thinking about retirement & what lifestyle you would like , I can't imagine anything worse than having lots of time on your hands & not having the funds to enjoy it
I suppose it depends if people are willing to sacrifice their younger more healthy self for the 'possibility' they may live to a ripe old age and can afford the best care home. :)
.
Personally I have sacrificed zilch always had plenty of time with family when the kids were young good holidays cars & homes & intend to carry on like that God willing , although as we all know any of us could " wake up dead" tomorrow.
Yeah. Nice to know your family will be OK though.
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Exactly Stemo , kids have done us proud boy joined Yorkshire Police force after. Uni & daughter after working in TV & film make up married & produced 4 grandsons , wifey & I are nicely set up & after we have departed this earth my kids will have a decent inheritance , that's all I ever wanted & as far as I am concerned I have achieved.
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But...and it's a great big but....who knows what could happen between 'now' and 'then'.
And that's the biggy, just said goodbye to a dear friend who was only 44,left a husband and two teenagers,need to live life now because who knows what tomorrow brings :-X
Agreed. I worry about dear old STMO with this heat. I don't want to hear he has keeled over while walking the whippet or clearing out the pigeon loft.
I hope that some kindly OOF member(s) living close to Barnsleywakefield can make the effort to pop in and make sure the old boy has something to eat, and a change of clean underwear. :)
Old lives matter. :)
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But...and it's a great big but....who knows what could happen between 'now' and 'then'.
And that's the biggy, just said goodbye to a dear friend who was only 44,left a husband and two teenagers,need to live life now because who knows what tomorrow brings :-X
Agreed. I worry about dear old STMO with this heat. I don't want to hear he has keeled over while walking the whippet or clearing out the pigeon loft.
I hope that some kindly OOF member(s) living close to Barnsleywakefield can make the effort to pop in and make sure the old boy has something to eat, and a change of clean underwear. :)
Old lives matter. :)
;D ;D ;D Cheeky bastid.
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But...and it's a great big but....who knows what could happen between 'now' and 'then'.
And that's the biggy, just said goodbye to a dear friend who was only 44,left a husband and two teenagers,need to live life now because who knows what tomorrow brings :-X
Agreed. I worry about dear old STMO with this heat. I don't want to hear he has keeled over while walking the whippet or clearing out the pigeon loft.
I hope that some kindly OOF member(s) living close to Barnsleywakefield can make the effort to pop in and make sure the old boy has something to eat, and a change of clean underwear. :)
Old lives matter. :)
;D ;D ;D Cheeky bastid.
Thank you Opti for your genuine concern would be a more appropriate response. :-* :-* :-*
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Exactly Stemo , kids have done us proud boy joined Yorkshire Police force after. Uni & daughter after working in TV & film make up married & produced 4 grandsons , wifey & I are nicely set up & after we have departed this earth my kids will have a decent inheritance , that's all I ever wanted & as far as I am concerned I have achieved.
Inheritance tax is 40% on all your estate above £325K each, or £650K per couple. With 5 BTL's and a main residence, you've got to be quite close or over that?
On the other hand, money/assets held in a private pension fund (though not defined benefit pensions like police, civil service etc) are outside of your estate, and can be passed on tax free to anyone you nominate on your death.
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Please rest assured my finances are in excellent order advice has been taken , never ever thought I would be in this position financially , just been very lucky indeed from a windfall 30 odd years ago .
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Ill retire when I drop lol ;D