Pensions

I have not taken much notice of pensions, I know that I haven't got one but
am contracted in the second state pension.

I have seen that they intend to raise the state pension age when I retire to
68.

I know that I won't get anywhere near that age and will be dead well before.

When I do go early is there anyway to transfer this pension to my partner or
do I just lose all benefits that I have paid all my life for.

Is there anyway for me to opt out of these pensions and put the money aside
for my family.

Re: Pensions

"Janet Stone" <> wrote in message
news:B08Gf.94065$
> I have not taken much notice of pensions, I know that I haven't got one but
> am contracted in the second state pension.
>
> I have seen that they intend to raise the state pension age when I retire to
> 68.

IIRC in the Turner proposals it won't be 68 till 2050.

> I know that I won't get anywhere near that age and will be dead well before.
>
> When I do go early is there anyway to transfer this pension to my partner or
> do I just lose all benefits that I have paid all my life for.

If you are married (or I guess a registered gay couple). I think you can inherit 50%
of your spouse's SERPS entitlement, and your spouse can get 60% of the basic state
pension you are entitled to if their entitlement on their own record is less.

See:



And NP46 contains nearly everything you'd want to know about state pensions:



> Is there anyway for me to opt out of these pensions and put the money aside
> for my family.

You can contract out of SERPS, but not the basic state pension.

There are other benefits your family can get, based on your NI contributions, if you
die before state pension age, such as Widowed Parents Allowance and Bereavement
allowance:





--
Andy

Re: Pensions

"Andy Pandy" <> wrote:

>You can contract out of SERPS, but not the basic state pension.

If you contract out into a stakeholder, do you know if the fund passes
to your beneficiaries as it does with non contracted out stakeholders
?

Also if Janet can prove impaired life she may be able to get something
earlier.
<>

Daytona

Re: Pensions

"Daytona" <> wrote in message
news:
> "Andy Pandy" <> wrote:
>
> >You can contract out of SERPS, but not the basic state pension.
>
> If you contract out into a stakeholder, do you know if the fund passes
> to your beneficiaries as it does with non contracted out stakeholders
> ?

Not sure, but it must surely be either that or a widow/widowers pension. Probably
depends on the scheme.

> Also if Janet can prove impaired life she may be able to get something
> earlier.
>
<
2+%22state+pension%22&spell=1>

From the state pension? I don't think so - I can't find anything from that search
that indicates that. Also nothing in NP46. Am I missing something?

--
Andy

Re: Pensions

"Andy Pandy" <> wrote:

>From the state pension? I don't think so - I can't find anything from that search
>that indicates that. Also nothing in NP46. Am I missing something?

No, NP46 is the bible. I just gave Janet the relevant keywords for
further investigation.

Daytona

Re: Pensions

<
> Please can we pool together all the wise resources on this newsgroup and
> come to a definitive answer to the age old question of whether it's more
> likely than not to be better for a young earner to aim to buy a second
> property in the future in order to look after oneself in old age rather than
> pay into a pension? (!)
>
> A tall order I know, but we should deal with such an important issue as it
> summarises the whole financial lives of most people.
>
> So, let's work on the assumption the young earner is mid 20's, has a 25 year
> mortgage and has £250 per month to do something with. OK there's no crystal
> ball and anything could happen, but what are the points to consider?
> Taxation, laws and potential future changes in laws, other investment types,
> interest rates. What else? Who can give the best argument on either side
> here?
>
> [throws down gauntlet: let the games begin!]

I presume you're talking about a second property to let.

Historically property prices have risen by about the same rate as mortgage interest
rates, which won't be too far off cash pension rates. So if he buys a second property
the mortage interest he's paying/savings interest he's losing should match the rise
in the property's value (based on the last 40 years history). He'll make a profit
from his rent minus expenses. Expenses (maintenance/insurance) tend to be about 2-3%.
Rental yields are about 5% at the moment - allow for 10% vacancy/problem tenants, and
the profit is about 2% of the property value. This will be geared by the percentage
mortgage he has, so an 80% mortgage may give a 10% return.

However it should be noted that this is extremely risky - with an 80% mortgage it
would only take a 20% drop in prices to totally wipe out his whole investment, and
with a 30% drop he'd lose more than he invested. Also one troublesome tenant could
cause major financial problems. Investing in the most risky of equity markets
carries less risk, you can't lose more than you invested! So it could be very
profitable (as people who BTL'ed 6 years ago know), but it is also very risky and
does involve far more work than an equity based investment.

--
Andy

Re: Pensions

> I presume you're talking about a second property to let.

Oops, forgot to clarify that point, yes, of course.

> However it should be noted that this is extremely risky - with an 80%
> mortgage it
> would only take a 20% drop in prices to totally wipe out his whole
> investment, and
> with a 30% drop he'd lose more than he invested. Also one troublesome
> tenant could
> cause major financial problems. Investing in the most risky of equity
> markets
> carries less risk, you can't lose more than you invested! So it could be
> very
> profitable (as people who BTL'ed 6 years ago know), but it is also very
> risky and
> does involve far more work than an equity based investment.
>
> --
> Andy

Well argued. It is indeed a risky business.

So you strongly believe that throwing any extra income into shares is just
as risky / perhaps even less risky than aiming for a BTL property to
safeguard the long-term future?

Interesting food for thought. Thanks for your input Andy.

Re: Pensions

<
> > However it should be noted that this is extremely risky - with an 80%
> > mortgage it
> > would only take a 20% drop in prices to totally wipe out his whole
> > investment, and
> > with a 30% drop he'd lose more than he invested. Also one troublesome
> > tenant could
> > cause major financial problems. Investing in the most risky of equity
> > markets
> > carries less risk, you can't lose more than you invested! So it could be
> > very
> > profitable (as people who BTL'ed 6 years ago know), but it is also very
> > risky and
> > does involve far more work than an equity based investment.
>
> Well argued. It is indeed a risky business.
>
> So you strongly believe that throwing any extra income into shares is just
> as risky / perhaps even less risky than aiming for a BTL property to
> safeguard the long-term future?

Property is generally less volatile than shares, so buying property with cash is
usually less risky that buying shares with cash. But then the average returns are
greater with shares.

The riskyness comes from gearing, if you buy with borrowed money you are multiplying
the potential gains/losses, therefore multiplying the risk. People don't tend to buy
shares with borrowed money, but they do buy property with borrowed money. An 80%
mortgage multiplies any gains/losses by 5, making an investment of £20,000 in a
£100,000 property far more risky than investing £20,000 in shares.

--
Andy

Re: Pensions

Andy Pandy wrote:

> <> wrote in message
> news:
>> Please can we pool together all the wise resources on this newsgroup and
>> come to a definitive answer to the age old question of whether it's more
>> likely than not to be better for a young earner to aim to buy a second
>> property in the future in order to look after oneself in old age rather
>> than pay into a pension? (!)
>
> I presume you're talking about a second property to let.

No, I think he's talking about a first property to let.

Re: Pensions

"Ronald Raygun" <> wrote in message
news:f6zfg.79236$
> Miss L. Toe wrote:
>
> > The main point to consider IMO is should this theoretical young earner
put
> > all his/her eggs in one basket.
>
> You keep going on about eggs, but if you've only got one egg, isn't it
> better off in a basket than not?

If you only have one egg, then it might be better to make an omlette. Have
some fun with it, invest it in something high risk and if it fails wait for
the next egg to get laid.

> Anyway, the trouble with many pensions
> is that they too are one basket.

Many can spilt your contributions into different funds.

> It might be a good idea, if opting for
> marketed pensions, to go for several mini-pensions instead of one maxi.

Yes

> Likewise, when it comes to retiring, it might be an idea to buy several
> mini-annuities instead of just one big one.

I have heard (but havent reasearched) that you get better annuity rates with
100k or more - so a guarded yes.

> And you can have a rental
> property *as well*.
>

And a second home in the sun,

> > IMO
> > - one should not consider putting money into a pension unless one is a
40%
> > tax payer. (Under current legislation - I didnt spot if the tax breaks
> > will remain the same under the new proposals)
>
> You forgot to add the rider "and will not be a 40% tax payer once
retired".
>

I did forget to add that sorry - How many pensioner are 40% tax payers ?

> > - One should not buy a second property as an investment unless it is a
> > small proportion of ones total investment strategy.
>
> So landlording is only for the rich?
>

Or foolish (IMO)

> > And most young earners that I know have enough trouble funding their
first
> > property.
>
> Ah, but here's the rub. BTL properties are *easier* to fund than own
homes.
> If your income fails the eligibility test, but you have enough saved for a
> deposit, you can buy a BTL because it's the rent, not your income, which
is
> used as a decider. Then you can move in and "rent" the place to/from
> yourself!
>

But would you be liable to CGT when you sold your investment :-)

Re: Pensions

Miss L. Toe wrote:

> The main point to consider IMO is should this theoretical young earner put
> all his/her eggs in one basket.

You keep going on about eggs, but if you've only got one egg, isn't it
better off in a basket than not? Anyway, the trouble with many pensions
is that they too are one basket. It might be a good idea, if opting for
marketed pensions, to go for several mini-pensions instead of one maxi.
Likewise, when it comes to retiring, it might be an idea to buy several
mini-annuities instead of just one big one. And you can have a rental
property *as well*.

> IMO
> - one should not consider putting money into a pension unless one is a 40%
> tax payer. (Under current legislation - I didnt spot if the tax breaks
> will remain the same under the new proposals)

You forgot to add the rider "and will not be a 40% tax payer once retired".

> - One should not buy a second property as an investment unless it is a
> small proportion of ones total investment strategy.

So landlording is only for the rich?

> And most young earners that I know have enough trouble funding their first
> property.

Ah, but here's the rub. BTL properties are *easier* to fund than own homes.
If your income fails the eligibility test, but you have enough saved for a
deposit, you can buy a BTL because it's the rent, not your income, which is
used as a decider. Then you can move in and "rent" the place to/from
yourself!

Re: Pensions

> Property is generally less volatile than shares, so buying property with
> cash is
> usually less risky that buying shares with cash. But then the average
> returns are
> greater with shares.

I agree with your first sentence, but with regards to your second sentence,
I'm wondering what factors you are assuming in order to come up with that
conclusion. Are you assuming that since some shares may well go up by a
whopping 1000% over 1 year and others may fall by 200% in the same period,
the overall average of say the FTSE 250, etc is higher than the average
house price rise / fall over a year, some logic like that? So, in conclusion
its not a very easy comparison to make since its like judging apples and
oranges...

> The riskyness comes from gearing, if you buy with borrowed money you are
> multiplying
> the potential gains/losses, therefore multiplying the risk. People don't
> tend to buy
> shares with borrowed money, but they do buy property with borrowed money.
> An 80%
> mortgage multiplies any gains/losses by 5, making an investment of £20,000
> in a
> £100,000 property far more risky than investing £20,000 in shares.
>
> --
> Andy

I wonder if there are historical figures for comparing average house prices
against average stock market gains / losses over a few decades - or does
anyone know off the top of their head?

Re: Pensions

> "Ronald Raygun" wrote
> > Ah, but here's the rub. BTL properties are *easier* to fund
> > than own homes. If your income fails the eligibility test, but you
> > have enough saved for a deposit, you can buy a BTL because
> > it's the rent, not your income, which is used as a decider.
> > Then you can move in and "rent" the place to/from yourself!
>
"Miss L. Toe" wrote
> But would you be liable to CGT when you sold your investment :-)

Just because the place is rented, doesn't stop it being your PPR!

Re: Pensions

"Tim" <> wrote in message
news:
> > "Ronald Raygun" wrote
> > > Ah, but here's the rub. BTL properties are *easier* to fund
> > > than own homes. If your income fails the eligibility test, but you
> > > have enough saved for a deposit, you can buy a BTL because
> > > it's the rent, not your income, which is used as a decider.
> > > Then you can move in and "rent" the place to/from yourself!
> >
> "Miss L. Toe" wrote
> > But would you be liable to CGT when you sold your investment :-)
>
> Just because the place is rented, doesn't stop it being your PPR!
>

Would you have to pay income tax on the rental income you paid yourself if
it was above the rent-a-room limit ?

Re: Pensions

> > > "Ronald Raygun" wrote
> > > > Ah, but here's the rub. BTL properties are *easier* to fund
> > > > than own homes. If your income fails the eligibility test, but you
> > > > have enough saved for a deposit, you can buy a BTL because
> > > > it's the rent, not your income, which is used as a decider.
> > > > Then you can move in and "rent" the place to/from yourself!
> > >
> > "Miss L. Toe" wrote
> > > But would you be liable to CGT when you sold your investment :-)
> >
> "Tim" wrote
> > Just because the place is rented, doesn't stop it being your PPR!
>
"Miss L. Toe" wrote
> Would you have to pay income tax on the rental income
> you paid yourself if it was above the rent-a-room limit ?

No - just charge yourself a low rent, so that
it does not exceed your allowable expenses!

Re: Pensions

Miss L. Toe wrote:

>
> "Tim" <> wrote in message
> news:
>> > "Ronald Raygun" wrote
>> > > Ah, but here's the rub. BTL properties are *easier* to fund
>> > > than own homes. If your income fails the eligibility test, but you
>> > > have enough saved for a deposit, you can buy a BTL because
>> > > it's the rent, not your income, which is used as a decider.
>> > > Then you can move in and "rent" the place to/from yourself!
>> >
>> "Miss L. Toe" wrote
>> > But would you be liable to CGT when you sold your investment :-)
>>
>> Just because the place is rented, doesn't stop it being your PPR!
>
> Would you have to pay income tax on the rental income you paid yourself if
> it was above the rent-a-room limit ?

No.

Well, you wouldn't pay yourself more rent than would just cover your
outgoings of mortgage interest, insurance, repairs, etc, would you?
Hence no profit, hence no income tax.

But the simple answer is that unless you rent to someone else you would
not be considered to have rental income. It is only the lender to whom
you pretended [*] that you were going to rent the place out.

[*] It need not have been a pretence. You could have genuinely intended
to let, but then found difficulty finding a suitable tenant. It was only
later that you realised that you might as well live there yourself and
save paying rent on where you were living before.

The lender can hardly claim you were defrauding them. After all, BTL
mortgage interest rates are generally higher than "normal" ones. The
only reason everyone doesn't pull this trick to get around the income
multiples rules, is that they haven't got the minimum 20% deposit which
BTL mortgages normally require.

Re: Pensions

What if you decide to combine the two ?

i.e. buy into commerical property (or a commercial property syndicate)
via a pension plan ?

Why does a 'second' property always need to be a residential property ?

Neil.

Ronald Raygun wrote:
> Miss L. Toe wrote:
>
> >
> > "Tim" <> wrote in message
> > news:
> >> > "Ronald Raygun" wrote
> >> > > Ah, but here's the rub. BTL properties are *easier* to fund
> >> > > than own homes. If your income fails the eligibility test, but you
> >> > > have enough saved for a deposit, you can buy a BTL because
> >> > > it's the rent, not your income, which is used as a decider.
> >> > > Then you can move in and "rent" the place to/from yourself!
> >> >
> >> "Miss L. Toe" wrote
> >> > But would you be liable to CGT when you sold your investment :-)
> >>
> >> Just because the place is rented, doesn't stop it being your PPR!
> >
> > Would you have to pay income tax on the rental income you paid yourself if
> > it was above the rent-a-room limit ?
>
> No.
>
> Well, you wouldn't pay yourself more rent than would just cover your
> outgoings of mortgage interest, insurance, repairs, etc, would you?
> Hence no profit, hence no income tax.
>
> But the simple answer is that unless you rent to someone else you would
> not be considered to have rental income. It is only the lender to whom
> you pretended [*] that you were going to rent the place out.
>
> [*] It need not have been a pretence. You could have genuinely intended
> to let, but then found difficulty finding a suitable tenant. It was only
> later that you realised that you might as well live there yourself and
> save paying rent on where you were living before.
>
> The lender can hardly claim you were defrauding them. After all, BTL
> mortgage interest rates are generally higher than "normal" ones. The
> only reason everyone doesn't pull this trick to get around the income
> multiples rules, is that they haven't got the minimum 20% deposit which
> BTL mortgages normally require.

Re: Pensions

wrote:

> Ronald Raygun wrote:
>> Miss L. Toe wrote:
>> > Would you have to pay income tax on the rental income you paid yourself
>> > if it was above the rent-a-room limit ?
>>
>> No.
>>
>> Well, you wouldn't pay yourself more rent than would just cover your
>> outgoings of mortgage interest, insurance, repairs, etc, would you?
>> Hence no profit, hence no income tax.
>>
>> But the simple answer is that unless you rent to someone else you would
>> not be considered to have rental income. It is only the lender to whom
>> you pretended [*] that you were going to rent the place out.
>>
>> [*] It need not have been a pretence. You could have genuinely intended
>> to let, but then found difficulty finding a suitable tenant. It was only
>> later that you realised that you might as well live there yourself and
>> save paying rent on where you were living before.
>>
>> The lender can hardly claim you were defrauding them. After all, BTL
>> mortgage interest rates are generally higher than "normal" ones. The
>> only reason everyone doesn't pull this trick to get around the income
>> multiples rules, is that they haven't got the minimum 20% deposit which
>> BTL mortgages normally require.
>
> What if you decide to combine the two ?
>
> i.e. buy into commerical property (or a commercial property syndicate)
> via a pension plan ?

Well, in a pension plan you don't have any expenses of your own to
set against income, the scheme administrators deal with all that.

> Why does a 'second' property always need to be a residential property ?

We were talking specifically about pretending that a "first" property
is "second". What did you have in mind? Buying an industrial shed and
living in it?

Re: Pensions

I see what you mean. That's what happens when I try and scan-read
posts.

I would'nt mind living in a shed. However, I doubt my other half
would......

Ronald Raygun wrote:
> wrote:
>
> > Ronald Raygun wrote:
> >> Miss L. Toe wrote:
> >> > Would you have to pay income tax on the rental income you paid yourself
> >> > if it was above the rent-a-room limit ?
> >>
> >> No.
> >>
> >> Well, you wouldn't pay yourself more rent than would just cover your
> >> outgoings of mortgage interest, insurance, repairs, etc, would you?
> >> Hence no profit, hence no income tax.
> >>
> >> But the simple answer is that unless you rent to someone else you would
> >> not be considered to have rental income. It is only the lender to whom
> >> you pretended [*] that you were going to rent the place out.
> >>
> >> [*] It need not have been a pretence. You could have genuinely intended
> >> to let, but then found difficulty finding a suitable tenant. It was only
> >> later that you realised that you might as well live there yourself and
> >> save paying rent on where you were living before.
> >>
> >> The lender can hardly claim you were defrauding them. After all, BTL
> >> mortgage interest rates are generally higher than "normal" ones. The
> >> only reason everyone doesn't pull this trick to get around the income
> >> multiples rules, is that they haven't got the minimum 20% deposit which
> >> BTL mortgages normally require.
> >
> > What if you decide to combine the two ?
> >
> > i.e. buy into commerical property (or a commercial property syndicate)
> > via a pension plan ?
>
> Well, in a pension plan you don't have any expenses of your own to
> set against income, the scheme administrators deal with all that.
>
> > Why does a 'second' property always need to be a residential property ?
>
> We were talking specifically about pretending that a "first" property
> is "second". What did you have in mind? Buying an industrial shed and
> living in it?

Re: Pensions

<
> > Property is generally less volatile than shares, so buying property with
> > cash is
> > usually less risky that buying shares with cash. But then the average
> > returns are
> > greater with shares.
>
> I agree with your first sentence, but with regards to your second sentence,
> I'm wondering what factors you are assuming in order to come up with that
> conclusion. Are you assuming that since some shares may well go up by a
> whopping 1000% over 1 year and others may fall by 200% in the same period,

Most shares are nowhere near that volatile, in any case any sensible shares
investment would be spread amongst various different companies/sectors/countries.
This could even make the investment less volatile than an investment in a single
property - which could fall just because bad neighbours move in, or a change in the
local area such as a motorway being built.

> the overall average of say the FTSE 250, etc is higher than the average
> house price rise / fall over a year, some logic like that?

Yes, the overall rise in share prices is greater than property prices historically.

> So, in conclusion
> its not a very easy comparison to make since its like judging apples and
> oranges...

No, and the other thing to bear in mind is that with a property there's work to do,
such as organising maintenance when the tenant rings to say the boiler has broken
etc, making sure all the regulations are adhered to, getting insurance quotes every
year, mortgages etc, dealing with problem tenants etc, whereas with shares you just
sit on your backside and let others do the work.

> > The riskyness comes from gearing, if you buy with borrowed money you are
> > multiplying
> > the potential gains/losses, therefore multiplying the risk. People don't
> > tend to buy
> > shares with borrowed money, but they do buy property with borrowed money.
> > An 80%
> > mortgage multiplies any gains/losses by 5, making an investment of £20,000
> > in a
> > £100,000 property far more risky than investing £20,000 in shares.
>
> I wonder if there are historical figures for comparing average house prices
> against average stock market gains / losses over a few decades - or does
> anyone know off the top of their head?

Have a search - but the problem is they will just show capital growth, not income (ie
dividends, or rent minus expenses).

--
Andy