overpay on mortgage or put money in pension

Depends on mortgage rate and tax band as to what’s best. It’s nice to pay debts off though.

We are looking at a very limited snapshot in time, in a very small number of priviledged western economies.

Annoyingly many of those now in retirement don’t realise just how lucky they are and still moan about the young. They benefited greatly from the house price boom too.

We are looking at a very limited snapshot in time, in a very small number of priviledged western economies.

I dunno, I’ve always been quite pragmatic about this kind of thing (same with university fees). Some people will always have gotten a better deal than me, others will have been screwed. On the one hand I’ll have paid uni fees and likely retire later, on the other I won’t die from a whole list of diseases which weren’t cureable 50 years ago.

I still intend to retire ‘on time’, just accepting I’m going to have to pay a bit more for it (just checked, currenlty 15% from me, 9% from work at 28, got a deposit but no house yet).

as I mentioned earlier I made the leap to retirement. I also down sized my house etc to minimize my out goings on council tax, heating etc etc

It makes your pension go a lot further. Seems like obvious advice but includes some tough decisions about down sizing or in my view sensible changes as you embark on your new life

I did buy a new mountain bike though 🙂

Well, I pay in 5% and the company pays in 10%, which I thought was pretty decent until I recently looked at the numbers. I won’t be very well off in my retirement!

I should really up my monthly contributions, but even increaseing it to 8% doesn’t seem to make a huge amount of difference to the outcome.

And….(stamps foot and sticks bottom lip out) it just seems a bit rubbish to have to take out quite a wedge of money from your salary into a fund that you won’t see for years and years. And the goalposts will keep moving and, and and……

it just seems a bit rubbish to have to take out quite a wedge of money from your salary into a fund that you won’t see for years and years

or, in other words, ‘saving for the future’. PTFU 🙂

I also down sized my house

I see it like this.

I am in a fortunate position to have a large family home that (at current value) is worth around £450k (due to an inheritance) that will be fully paid off around my retirement age. We then intend (unless we have had any further inheritance by then) to sell it and move to a smaller place that would be worth around half. Part of the proceeds would be to provide funds for our twins higher education should they wish to go down that route, the rest will be invested in the best way to see us into our retirement years. At some point there will be a further inheritance that will see us to our death. The smaller house we bought will then be split 50/50 with our girls to provide them with their inheritance and help them on the housing ladder.

Alternatively, just smoke, drink excessively, take drugs, and live on pies and kebabs.

Bingo: early death from heart disease. You’ll have enjoyed life to the full. You’re not a burden on the state. And you won’t be living in subsistence level poverty, grubbing around for extra hours on your zero hours contract, in the Garden Centre section of B&Q when you’re 82

Its a win/win 😀

I am in a fortunate position to have a large family home that (at current value) is worth around £450k (due to an inheritance) that will be fully paid off around my retirement age. We then intend (unless we have had any further inheritance by then) to sell it and move to a smaller place that would be worth around half. Part of the proceeds would be to provide funds for our twins higher education should they wish to go down that route, the rest will be invested in the best way to see us into our retirement years.

😯

And if house prices crash between now and then?

Look at what happened between 1990 and 1995 to house prices and assume the same happens over the next five years (noting the similarity in the pattern now and then)

[edit]

I’m going to leave it all in my will to the nieces and nephews, they’ll spend many a happy hour looking after my every need as I get older and more insistantly demanding. Secretly though the will gives it all to a cats home.

i’m not relying on being able to fully retire at any point or rely on any state aid.

pay the mortgage off, reduce outgoings, live somewhere modest and efficient and hope i’ve still got a brain to earn money with…

My current plan (all being well) is to take a trip to Switzerland between age 80 and 85 (unless UK law changes in the next 45-50 years).

Retire, live a good life and then say goodbye without being a burden on family or paying extortionate amounts to be ill treated by care home staff.

And if house prices crash between now and then?

If house prices crash then the house I buy will still cost approx half of the one I sell. Granted I won’t have as much proceeds but that’s a risk I have to take.

Best thing seems to me is to build up capital in a variety of places – e.g. property, ISAs and pensions. Private pensions look a bit better now that you can take money out at 55 – though only 25% tax free IIRC. Who knows what the Gov’t in future years will do to raise money so keeping options open seems sensible.

Pension is the one area I’m vaguely sorted in.

-aged 39.
-Mortgage set to pay off at 63.
-10k per year RAF pension from 65, 20k lump sum also.
– new work pension company pays 12%, me 6%. After 8 years
Fund is £110k.
-State pension from 67(maybe!)

Your new work pension fund is £110k and you have the RAF one on top?

Is there any where that states what a sensible pot for your age is? I know it depends on circumstances, but a rough range would be useful.

I’ve been trying to compare a 2.32% index linked defined benefit of a good salary vs a 18% withprofits of a better salary. and my head hurts.

I’m with DooSuk. Shortest short stories “Two tickets to Switzerland, one single, one return”. Life seems to go downhill incredibly fast after about 80 from what I can see. Live life to the full until then and bail out before it all gets grim.

dantsw13 – just worked out what you’re earning – any jobs going at your place?

TheStabiliser – yes if your qualified! If not, you’ll need my pension pot first to pay training costs! I’m lucky the RAF trained me.

I was reading an article today suggesting that after the next election whoever wins will abolish HR tax relief 🙁

Mud shark – wish I hadn’t put any figures down now, but yes. 12 years officer service in the RAF pays 10k per year from 65.

Private pensions look a bit better now that you can take money out at 55 – though only 25% tax free IIRC.

Plus any threshold tax allowance you have left yearly after that via income drawdown.

Distress purchases. Welcome to the system, your leaders need you to keep them fat and happy.

I’m going to befriend a vet. They have the best options.

[video]http://youtu.be/9qEsTCTuajE[/video]

Mud shark – wish I hadn’t put any figures down now, but yes.

I’m guessing thestabiliser has over estimated your income as won’t know what annual growth you’ve got.

The only thing I’d add is that for people whose employers are not matching their contribution they may want to consider putting their dough in a ISA

With the recent increase in cash ISA limits combined with the fact there will be no pension fund ‘management fees’ and the flexibility – the cash is your cash, you don’t have to buy an annuity and you’re not limited by the amount you can take as a lump sum on retirement.

I would say consult an IFA for sound financial advice, but there all on the take so don’t bother.

ISAs no longer exist, they’re all New ISAs now (NISA). Personally I’d go for a stocks and shares NISA with a spread of managed funds, as over the long term you’ll get a better return than with cash.

ISAs no longer exist, they’re all New ISAs now (NISA).

Thanks footflaps, I’m not sure people would have realised what I was on about….

Well if you going to go for a stocks and shares NISA there’s no reaason to not have a SIPP really – unless you could need the money in the shorter-term.

Cash ISAs are almost pointless for the longer-term – good to have some cash though.

With the recent increase in cash ISA limits combined with the fact there will be no pension fund ‘management fees’

With a stocks and shares isa there are still fees.

the cash is your cash, you don’t have to buy an annuity

You don’t have to buy an annuity with your pension fund now either.

and you’re not limited by the amount you can take as a lump sum on retirement.

Same a pension fund now although there are tax implications for pension funds. These don’t exist for isas as the initial investment in net of tax rather than gross. Oh and the limit for an isa is £15k, a pension is £40.

Well if you going to go for a stocks and shares NISA there’s no reaason to not have a SIPP really – unless you could need the money in the shorter-term.

I thought a NISA had more flexibility as you can sell all the stocks and take the lot tax free as cash (if you want), whereas with a SIPP you’ll be taxed on taking a large cash lump sum?

Anyone with an eye for pension planning…does this seem bananas for a 30 year plan?

Max out pension contributions at 10% with 10% matched from employer + associated higher rate tax relief benefits.
Every 3 years, use cash savings to purchase buy-to-let on interest only basis – rent out.
Upon retirement take as much of pension pot in cash as is needed to pay off BTL mortgages.
Sell off/rent out properties as required.

The reason I ask is that if you bought 4 x £150k flats, with a total outstanding mortgage of say £500k…when those mortgages hit the end of their term, you’re obviously still on the hook for £500k. Paying that with cash will cost you…£500k.

However, taking £500k from your pension fund will most likely have cost you considerably less than £500k due to tax relief on contributions, employer contributions and any increase in value of the fund.

If property prices are exactly the same in 2044 as they are in 2014 (seems quite unlikely!). You lose nothing when it comes time to pay off the mortgages, that element of your pension pot is still worth £500k.

However, if house prices have (for example) doubled over that 30 year period, your £600k flats are now worth £1.2m. By using some of your pension pot to pay off the outstanding £500k, you’ve probably only actually contributed say £200k to it…so you’ve picked up a £1.2m investment for £200k out of your own pocket (plus original £100k in deposits for the flats).

Other than the obvious…stopping contributions to pension fund for whatever reason, pension fund losing money or housing market being on its arse…what else am I missing?

I was reading an article today suggesting that after the next election whoever wins will abolish HR tax relief

That’s been talked about in the past and encouraged me to put some lump sums in. An easy way to get some more money from the better off but they do seem to be the ones who keep having to pay more!

I thought a NISA had more flexibility as you can sell all the stocks and take the lot tax free as cash (if you want), whereas with a SIPP you’ll be taxed on taking a large cash lump sum?

Yes but you do get the income tax back up front which is worth a lot of higher rate tax payers.

does this seem bananas?

Hmm well all OK if you can fund the mortgages. Thing is it’s a pretty risky strategy as if the rent you’re getting doesn’t cover mortgage and associated costs then you could be forced to sell and if that coincides with a slump in the market, as it likely would, then you could quickly get wiped out as so heavily geared.

munkyboy – Member
Anyone else 40 with no house and no pension? I think I will be using that bridge mentioned earlier…

yup

and it’s not like I’m spending anything either

not a pot to piss in

Thing is it’s a pretty risky strategy as if the rent you’re getting doesn’t cover mortgage and associated costs then you could be forced to sell and if that coincides with a slump in the market, as it likely would, then you could quickly get wiped out as so heavily geared.

You wouldn’t be able to get a BTL in the first place without the rental value being 125%+ of the interest payment. So do you mean where rental values drop below the finance and other costs? Rental prices have been pretty stable in my area for the last 15 years or so (I know that’s no indication that they will remain like that), but you’d have to be pretty unlucky to have 4 unoccupied rental properties for 6 months+ surely, if you’ve bought sensibly in the first place?

I should point out, this isn’t meant as sole pension strategy. matched pension contributions are only up to 10%, so looking for additional options to stick money in other areas, rather than the current strategy of finding a wall and pissing all over it 🙂

We had a rental flat at around the £150k mark and it was a bit of a nightmare. It’s at the low end of the market, so has low paid tenants who seem to have the least stable jobs ie get made redundant a lot, which means missed rent, evictions etc etc. After many years of turning a modest profit, since the downturn in 2008, it’s been a money pit and lost £1000s (eviction costs are high).

We also let a house and that is much more stable as we get Doctors etc as tenants rather than beauticians etc..

Most unpleasant job I’ve ever done was enacting an eviction and changing the locks etc turfing out a couple with a baby onto the street (literally that was where all their possessions were piled up as their ‘mate’, who was supposed to help them move stuff has failed to turn up).

Remember your best laid plans will have to fit in with changes in your life, marriage, divorce, children, redundancy, ill health. But not having a plan is a plan to fail. Any plan will work as long as you stick with it.

You wouldn’t be able to get a BTL in the first place without the rental value being 125%+ of the interest payment. So do you mean where rental values drop below the finance and other costs?

Yep rental values drop but also if unable to rent for a long period of time or tenants don’t pay for whatever reason. Not saying don’t do it but there is a risk.

In the last downturn quite a few BTLers were made bankrupt. The main thing is to buy the property at the right time so those that managed to buy in the mid 90s say did fantastically.

I think a lot of small BTL landlords ran pretty close to the edge and underestimate the real costs. While the market rises strongly they do OK but easy to come unstuck when it turns.

Do the sums – 125% cover on interest means income of £1250 a month on mortgage of £1000. Pay an agent to let and manage at 10% (always plus VAT) and that’s 150 a month of that cover gone so there’s only £100 in the bank which is only £60 after tax. Hard to have less than a two weeks between tenancies which reduces would means £600 ‘lost’ income if the first tenants leave after a year.

A small drop in rental values or property value and remortgaging becomes impossible = bankrupt.

http://www.pensionsadvisoryservice.org.uk/

http://www.bbc.co.uk/news/business-27731567

http://tunein.com/radio/Bricks-and-Bubbles-p629311/

http://www.bbc.co.uk/programmes/b04c9gsg