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.

@UserNameNameNameUser No sorry, we won’t get double 🤣if only…but we will have a state pension, they take the portion of what we’ve paid into in the U.K. and where we are. We’ve basically been paying into the European system since we were 16, are 40 now and will be until we’re 65
With Brexit, it changes nothing as we paid into the U.K. system before Brexit, we wouldn’t lose those years

[quote Itsallgoingtobemagnificant]@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%)[/quote]
But just double check you would receive what you think you would.

This is what the gov site says:

Your UK State Pension if you’ve lived or worked abroad
Your UK State Pension will be based on your UK National Insurance record. You need 10 years of UK National Insurance contributions to be eligible for the new State Pension.

You may be able to use time spent abroad to make up the 10 qualifying years. This is most likely if you’ve lived or worked in:

the EEA
Switzerland
Gibraltar
certain countries that have a social security agreement with the UK

Example

You have 7 qualifying years from the UK on your National Insurance record when you reach State Pension age.

You worked in an EEA country for 16 years and paid contributions to that country’s state pension.

You will meet the minimum qualifying years to get the new State Pension because of the time you worked overseas. Your new State Pension amount will only be based on the 7 years of National Insurance contributions you made in the UK.

The bit I’ve put in bold seems to suggest that whilst you’d ‘qualify’ your actual payout would be based only on the UK years you paid in.

So if you needed 35 to get the full state UK pension you’d need to be moving back sharpish!

But perhaps I have misinterpreted. That’s why you need to make double sure with a good IFA.

Contrary to what some people have said you are in a better position than most people of your age, in particular you have no debt other than the mortgage which is long term with relatively low interest rates.

@NoSquirrels Yes, but the years worked here contribute also, so even if we moved back, we’d have those years with us, if that makes sense?

I'm about to turn 37, and I've been self-employed/freelance since I was in my 20s. So I have no employer pension, only what will be state pension. My intention is also to hopefully acquire an investment property once I'm 40, or around that age.

It's my understanding though that you need a higher deposit for that. Some articles I've read have said as much as a 40% cash deposit. I'm not sure how accurate this is.

Honestly, I would recommend you find a good financial advisor and do a lot of research online. There are a lot more resources online now than there used to be. It feels like a lot to get your head around, but you'll get there. You just need to know what the right path is for you. I'm not sure you'll get the help you're looking for here unfortunately, as a lot of people probably have pensions through their work, or possibly only the state pension.

@Spaceman1 Thanks! I was freaking out a bit there! But I know I need to sort something else too. I know lots of people just renting and paying into the system for a state pension, they don’t seem that worried, I am 😬

[quote Itsallgoingtobemagnificant]@NoSquirrels Yes, but the years worked here contribute also, so even if we moved back, we’d have those years with us, if that makes sense?[/quote]
I’m just saying make absolutely sure to check it. Perhaps you’ve already done that? It’s just that you also don’t seem to know much about private pensions etc and so if general financial literacy into pension planning is an area you’re unsure of, why not get expert advice on all of it? As it’s all linked.

You really need to see an independent financial advisor in both countries to set you on the right path

I’d buy a property that is in an area where rentals are much-needed. I know a few people who supplement their state pension with rental income and manage fine. And all the time their property is going up in value.

@NoSquirrels Yes definitely, you’re right.

@DGFB Yes that was possibly the plan, or to buy now and sell in the future and ‘Hopefully’ have some profit from the sale, plus if we are able to save some of the the profit from rent each month, we’d have to be strict about this though.

The issue with buying an apartment is that all of your retirement planning is basically in one basket - portuguese property. That generally isn't the best option for long term financial planning. You have relatively little diversification.

Things to think about with property:

• How much would you have to invest upfront in terms of a deposit (and what could that earn elsewhere, in a proper investment not a bank account!)
• what would the mortgage payments be, and how volatile would these be (not sure what buy to let mortgages in Portugal are like!!).

-Interest only or repayment?

• what would the rental income be and how consistent
• what other costs would you have? Maintenance, insurance etc

-what tax would you pay on the income earned? What if the rules changed - for example if you can currently offset mortgage interest and this was removed

• what taxes would you be liable for on sale
• how would you cope with void periods (you'd have to cover all the costs)
• would you have the funds to cover big repairs (which can be an issue in blocks of flats in the UK certainly - it's decided the lift/roof/whatever needs upgraded and suddenly you need to find £10s of Ks)

-What if property prices fall, or just slow down/stagnate. -how much time/effort/work would it be to manage.

I'd agree with those saying you need expert advice from someone who can properly check up on your state pensions, but also explain how private pensions work too. They can effectively be as risky as you want them to be - both in terms of the firm you use (although insurance companies are subject to much more stringent regulation now so you are unlikely to lose as a result of the firm failing) and the choice of investments.

I'm 35, currently between me and my employer about £980pcm goes in to my pension. At the moment it is in relatively high risk funds which means it can be quite volatile, but that doesn't bother me as it is a long term investment.

Well start with what you can afford to save. Can you get a buy to let mortgage? Have you got the appetite for it? How much do you need to retire on?

It’s all so confusing, it stresses me out to be honest, does it stress anyone else out? 🤷🏻‍♀️

@NoSquirrels Does this make sense? I’m
Still a bit worried about only having paid into the U.K. system for around 7 years, does that matter?

[quote Itsallgoingtobemagnificant]@NoSquirrels Does this make sense? I’m
Still a bit worried about only having paid into the U.K. system for around 7 years, does that matter?[/quote]
Is this advice pre or post Brexit?

I think @NoSquirrels is right, your screenshot says the same thing. You’ll get a proportion (i.e 7 years) of state pension from the UK.

@Kitchendilemmas After

@elbea So I’ll basically qualify for all the years I’ve put into both countries? 7 years in U.K. and the rest here? (So far?)

I read it as you’ll get 7 years of state pension from the UK. Then from the Portuguese government you’d get a pension based on the actual amount you pay in rather than a set rate like in the UK. From a quick google pension rates in Portugal aren’t necessarily great so I’d pay for some actual financial advice.

www.expatica.com/pt/finance/retirement/pensions-in-portugal-105266/

@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?

Oh no, you can still claim child benefit even if your DH earns more than £50k. You simply decline the payments. You are still entitled to the NI credits towards state pension until youngest child turns 12.

OP

I agree speak to a professional financial advisor in Portugal.
I would be hesitant to buy a Portuguese holiday property as an investment as that is putting all your eggs in one basket.
I would look for some kind of private pension plan. You can diversify your investments to be any level of risk you are comfortable with. They have funds that invest in property, in socially responsible companies, and so on.
I don’t know if Portugal has anything government subsidised like the U.K. LISA but that is a question worth asking.
Portugal does have pension societies you can see whether your employer is part of or not.

Get life insurance sorted immediately- that’s not a huge expense and has to be done if you have a DC.

Both of you should join the workplace pensions at your work and make generous contributions. You get employer contribution and tax relief, so it’s far better financially than a Buy To Let.

Get a cash or stocks and shares ISA too; you can do basic models if you don’t know what to do, but for the love of God join your workplace pensions.

If your workplace pensions are “defined contribution” schemes your contribution plus the employers and tax relief should add up to 20% of salary to be enough to give you a decent retirement. It goes out pre-tax so isn’t as huge an amount as you’d think.

Call the Money and Pensions Advisory service for more impartial advice.

@PlanDeRaccordement thank you so much!!!

You need professional advice, putting it very simply you need to work out approximately how much money you will need per month when you retire at say 65, you then need to work back to now to work out how much you need to invest per month to get as close to the income need as possible.

If you buy a flat how will you pay the mortgage when you don’t have a tenant?