Private pension or buy an apartment

[Itsallgoingtobemagnificant]

Really rubbish at all this stuff as don’t like planning for boring things, but we’ve turned 40 now and wish I’d planned it years ago. Dh and I have worked all our lives and paid into the system, so should be entitled to the state pension when the time comes. We bought our own house around ten years ago and owe around £100 grand until it’s paid off, it should hopefully sell for around £260 when the time comes when we want to sell,
We don’t have a private pension each or savings 😬we have no debt as such, aside from the mortgage, our car is paid for.
Are we in a crappy situation for the future? I keep seeing sorted people with private pensions, life insurance etc and i’m feeling a bit panicky.
We could possibly buy a small apartment as an investment and rent it out (we live abroad, It’s commonplace here and fairly reasonable) or we could each pay into a private pension instead, we can’t do both.
Any advice on the best thing to do?
We have a small Dd to think about and possibly future university/house deposit too.

I would very strongly suggest you ask your question in the pensions section of the MSE forums. The financial knowledge and help you'll get there is amazing. They can be quite blunt, but the advice is always spot on and excellent.

@NoSquirrels We know about the state pensions, we are entitled, they would take the years we paid into U.K. with the ones here, we’re resident here. We will be ok state pension wise.

Yes I wondered about stocks and shares, but literally have no idea the first place to start.

I would never buy an apartment instead of a pension personally, but by the same token it doesn't read like you know enough to invest in a pension just now. In your shoes, I would see an independent financial advisor and then go the pension route. But as above, also read up in the MSE forums.

@DotDotDotDot What’s the MSE forum please?

Sounds like you need professional financial advice. It’s a bit difficult for any of us to say without knowing anything about your situation - not even the country you’re living in!

Don't overlook the many additional costs associated with letting property out. For example, paying tax on the income, landlord insurance, buildings insurance, void periods/loss of income, council tax liability during void periods, estate agent management fees, re-decoration, repairs and maintenance, electricity inspection certificate, gas safety checks annually, water testing, legal fees, etc.

@DotDotDotDot Why wouldn’t you go down the property route? I live in a holiday resort where there’s always demand for places by the sea, we could also make a profit from holiday rentals. I’m not sure about trusting private pensions 🤷🏻‍♀️

What country are you in, OP? Do you intend to retire where you live now, or back to the UK?

@DGFB What would be your reason for going with the apartment?

@NoSquirrels Portugal, we’re not sure it could be either, but we’ll be covered by what we’ve paid into both countries for a state pension.

@NoSquirrels There’s 25 odd years to go, we could stay or move back to the U.K. at a later date for DD’s education etc

You need specific advice for your region. We don't know what your tax and inheritance laws are. Or whether property is more lucrative than the average return on a medium risk.

If you go for property you need to properly understand tax implications, be able to afford it being empty and be able to afford repairs etc to be a responsible landlord.

You hopefully have 20-25 years to rectify this so perhaps you'd be best initially looking where you can cut expenses and start saving. Also you mention your property and mortgage, could you downsize or move somewhere cheaper to release equity once your daughter leaves home?

Could you live on about £179 a week - or the future equivalent - when you retire? Would you be happy with that level of income?

If not, you need to be thinking about how you invest for an additional income (shares, apartment, savings account, private pension etc) and whether you will be getting any income from an employment or other pension so that you will have sufficient to live on when you retire. Read up on Money Saving Expert (MSE) but if you are not in the UK, you'll also need to have advice from a pensions advisor in the country where you are resident.

There is fantastic tax relief into pensions in the UK, you should check out what the position is in Portugal. I overpaid on my mortgage in my forties and now wish I had paid more into a pension and paid off the mortgage with my lump sum.

A private pension is buying into stocks and shares and other investments - except that your money is in a big fund with everyone elses and there is a big spread of investments so that the risk of loss is reduced. That added to the tax relief makes pensions a good option that you should understand before you throw your lot in with property.

Which country are you in now OP? Do you plan to return to live on the UK?

I wouldn’t bank on the state pension, it’s pitiful. Me and DH are both 30 and have a LISA each as well as private pensions. Im a SAHM but both pots get equal amounts paid into them and we max out the LISA at £4,000. I don’t claim child benefit as not entitled so that reduces my state pension I think?

@FlumpsAreShit Yee that’s definitely the plan with the property, we could easily downsize and should (hopefully) have a healthy amount from that. I’m thinking with this and the state pension and either another property to either still be renting out or sell, or a private pension?

[quote Itsallgoingtobemagnificant]@NoSquirrels Portugal, we’re not sure it could be either, but we’ll be covered by what we’ve paid into both countries for a state pension.[/quote]
From what I can see, whilst your entitlement to a UK state pension is protected by having paid into the Portuguese system (in that it makes up your qualifying years) your actual pension might only be paid out based on the UK NI contributions.

But I am not an expert and you seem quite sure about it! I hope you are clear on all the rules, and any post-Brexit changes, because it would be a big blow to not have what you expected and therefore might change your plans.

Private pensions are well protected now under UK regulations so not likely to lose your money - the main risk is that it won’t grow as much as hoped for.

As I said, I’d stay away from property as it can be a millstone as much as an investment.

Get some really good professional advice from an independent financial advisor who specialises in Portugal/UK expats.

Sorry to clarify to everyone, my plan is obviously not to survive on the state pension, which is why I’m looking at the options, we do the house but we need extra either from a private pension or a property

I agree with another poster that you sound a bit blase. You keep mentioning the state pension so you'll be fine, you've got that. That's not a plan or something you should be relying on. I'm in my late 30s and I'm very aware that by my retirement time the state pension may not exist in the same form as now. And it certainly won't be a lot of money, not enough to sustain.
You should really speak to a financial advisor but personally I would go the private pension route. Investment property may sound straight forward....buy, rent out for more than your mortgage, pocket the extra, but what about when things break or need to be fixed, your tenant stops paying rent, you can't rent it out for a period of time? Its a lot of work or you have to pay someone to deal with it all for you.. You can really only make money from Investment properties if you have more than 2.

@RussianSpy101

I wouldn’t bank on the state pension, it’s pitiful. Me and DH are both 30 and have a LISA each as well as private pensions. Im a SAHM but both pots get equal amounts paid into them and we max out the LISA at £4,000. I don’t claim child benefit as not entitled so that reduces my state pension I think?

If you are a SAHP, you should claim child benefit for your NI contributions, and your DH would just declare it on a Self-Assessment tax return every year and pay some back.

It’s worth doing to protect yourself. You never know what the future holds,

I’d be amazed if you can get a full state pension from both the U.K. and Portugal. Yes f that was the case, surely many people would exploit that as a loophole to double their pension for minimal effort.

You asked how much people pay onto private pensions. I pay £36k per annum, to cover both me and DH.

You also asked out how safe pensions are. It depends on what you invest in. A pension is really just a wrapper for a type of investment.

@NoSquirrels Yes that’s it, we’re covered because we’ve paid into the system here also, we’re ok state pension wise.

After hearing some worrying stories, it put me off the thought of a private pension. I wondered if property may be better for earning a little in the meantime also and then hopefully selling for a profit in the future alongside our house now (o realise this can’t be guaranteed 100%)

@Figgyboa I realise I don’t want to rely on state pension, it’s why I’m asking here 🤷🏻‍♀️I also said about our house and that we’ve been overpaying for years and have paid off a sizeable chunk.
I’m not blasé, hence my wanting to sort out whether to pay into a private pension or buy another property

I would start saving money into a global index equity index fund such as vanguard, hsbc or fidelity 50:50 into SIPP (private pension) and ISA, both allow your investments to grow tax free. Less hassle than buy to let and without the tax complications.