Would you buy a little flat with your lump pension sum? NHS

[EachandEveryone]

I am a nurse in the good old pension scheme which I am not allowed to pay into anymore as we have been moved to a new scheme whic puts our age at 68. In my old scheme the rules are changing and I can take the lump sum of £100,000 my monthly would be £1,000 but the rules now say we can go back to our job less 20 percent which would mean my salary would be £2,000 plus my pension. Im assuming it would be 40percent tax?

i have cancer so am on sick pay when this drops to half my sickness insurance kicks in at £1,400 so I have no rush to go back to work until, please god, I am fit and well. I wont be giving this up. I am renting in London. I love alondon plus I wont want to change hospitals etc.

the chace has come up to buy a two bedroomed flat up North next to my cousins block. It wont be til the end of the year and it will be £80,000 (we are from a Northern not very exciting town) it will be easy to rent out for about £550 a month. My question is should I go for it? I wont be living there for many years. I have no property investments. The other option would be to buy a quarter in one of those schemes in London but the rent will be about £900 plus service charge.

what would you do?

Get proper financial advice.

And good luck with your treatment.

Yes I will do. The NHS doesnt make it easy to do. I could also retire on medical advice but Im assuming that means I cant go back to my normal job

it will be easy to rent out

It won't. Being a landlord is a professional job. You should know the law, have monies for rent loss and repairs and emergencies. Simeone could just squat and refuse to leave.

Be careful.

My pension will die with me thats the other thing as Im single. If I die without touching it my death in duty will be £90,000 to my sister. Either way there is no fun money. Id either buy a flat or go on many cruises and have money to spare but Im guessing no benefits when it runs dry 😃

Mn is not the place for these sort of questions as any sort of landlord is unacceptable on here. Personally I’m thinking why wouldn’t you? Get good landlords insurance and give it to an agency.

Here we go. Replies like this. I’ve inherited 2 properties and bought a property that became unsuitable within a year for me for personal reasons. With insurance and an agency to take responsibility you’re covered. My insurance even covers me if the tenants don’t pay rent for any reason. I’ve got 3 properties and 3 children now, I will make sure they inherit one each. Mn hatred of landlords will not stop me from putting my children first!

Get some sound financial advice.
It's not as straightforward as it seems.
You wil still have to pay on your rental income plus building insurance, ground rent and or service charg plus the letting,agent will also take a fee.

Pay tax.

Here we go. Replies like this.

I am a landlord (social) I've been a landlord (personal). For thirty years. I can have an opinion that isn't yours.

Would you actually want to live in the northern town at some point??

I think it's always a risk. But why not. Get an agent to manage it and you can claim their fees against tax. But think carefully before you take this step. Why not go back on reduced hours when you are well enough to return to work. That will keep your tax bill down.

Rent alone doesn't seem to be that great a return on investment? 550x12 = 6600 on 80,000 so 7pc before any costs and taxes involved?

Is there likely to be any capital growth and will you live there at some point?

If no, I am thinking appropriate investments in stocks and shares which using ISAs are income and capital gains tax free... however you are subject to amraket fluctuations though the money is more accessible...

I medically retired from the NHS, I can't remember the details but I am not allowed to go back to any NHS work without the possibility of losing my pension, there is, or was, a provision that you could go back to a different job but if you retire on ill health you will not be working for the NHS.

This is the time to pay for independent financial advice.

I thought I’d go back two days instead of three and my £1000pension would make it up to my regular wage now. Whether you can do overtime is another thing. I expect it will be highly taxed. My cousin suggested Airbnb but it’s not my bag really. She said there’s a good need for it as she does it with one of her properties and thought I could get on board with it as they are the same building. Two purpose built flats with garage and gargled.

about living in it. I reckon this will be once I get my state pension but honestly I love London especially at the minute when I’m getting good discounts for exhibitions and theatres. The only upside to cancer😀 like I said my pension will just go nowhere so part of me thinks 450-500 a month for 24 years shouldn’t I really be claiming it and go back and continue into the nee pension. That way I don’t lose annual leave or sick pay. I wouldn’t be entitled to UC I doubt although I do get a little bit now which surprised me.

The rent of £550 pcm on an £80k purchase gives you a gross rental return of 8.25%, which is very good. You can place the property with a good management company ( choose carefully) who will charge 10-15% plus VAT. They will find a tenant , check references , deal with the tenancy agreement etc.. and collect the rent. Usually a one off fee of a month’s rent for this. You need the best company possible and still have to check the rent arrives each month. Check there are no cladding issues with the flat ( and any flat)
Don’t forget there are additional costs, legal costs to buy and you’d have to check the latest Stamp Duty rules. As it’s your only owned property you probably don’t pay SD. Look at any leasehold fees too or monthly ‘ sink fund’ costs. Deduct these and recalculate your return.
I’ve always been a go for property person and it’s funded my pension for many years.

Thanks for that it’s only two built for purpose flats mine would have the but I would be happy to share it with my cousin if that could be in the tenancy. It’s a student town many good letting agents. It’s not a student cul de sac but they have many staff looking for flats there’s also a large hospital and medical school. I don’t think it would be a problem. I’ve picked £550 out of the air but who knows how much it could be, I’d rather have good tennants.

Yes i would. You are providing for yourself when you become older by doing this and giving yourself somewhere to live. Go through an agent to let it out.

I wouldn't do anything other than speak to a qualified financial advisor, they can tell you not only what your options are but what are your best options and what are your secure (fixed rate) options.

What do you u mean v about fixed rate? I wouldn’t get a mortgage these places hardly go up in value.

It doesn't sound like a terrible idea in principle particularly if you might want to live there in future, but I think you do need to do some proper sums and potentially take some proper financial advice. E.g. it worries me a bit that you have plucked the figure of £550pcm per month out of the air, obviously this is just a MN thread so no obligation to have fully done your research, but obviously whether it's £450/£550/£650pcm makes a huge difference to whether it's a good idea as there are lots of other things you could potentially do with that money rather than buy property, which keeps your options much more open if you aren't sure where you want to live long-term. Many people seem to have the bizarre idea that your investment options are either BTL flats or leaving the money in a current account, when there's loads of other things you can do with the money that can be safer, more profitable, more tax efficient, easier and/or less risky than BTL depending on your circumstances - I think this is what a PP meant by exploring your 'fixed rate' options - fixed rate savings rather than a fixed rate mortgage.

What do you mean by the NHS makes it difficult to take advice? I don't think they do particularly make it that difficult, obviously the fact that there are old and new schemes is a complexity but that's pretty standard, very few people have all their occupational pensions in a single scheme. At least with the NHS the benefit is that pretty much all the T&Cs are totally publicly available and it's a huge and common scheme so most financial advisors should be au fait. I'd do as much homework as you can on what exact lump sum and pensions figures you'd get from your pension under the various options (should be requestable from NHS Pensions) and on the possible flat purchase (purchase costs, upkeep costs, agents fees and conservative estimate of likely rental value) and how much tax you'd have to pay on all that taking into account your likely monthly income when you've 'retired and returned', how that stacks up on the best ISAs and other investment accounts available, and then if that doesn't give you a clear answer perhaps book an appointment with a good IFA?

Yes it’s all further down the line I think while I’m sick and in treatment with insurance starting soon I will start putting £500 a month into an isa and make sure all my bills are up to date. For once in my life I might beable to get ahead of myself ironically. My rent isn’t bad in London so I wouldn’t be giving it up anytime soon. I’m saying £550 because even rents at home have climbed and I know someone paying £800 fii out r a two bedroom terrace. The flat has been refurbished a couple of years ago and in good Nick. All this will not be happening before Xmas.