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Investments

Discuss investments with other users on our Investment forum. For more advice read our tips for saving for your child's future.

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Original poster

When to compromise for pension?

53 replies

Twoshoesnewshoes · 27/03/2024 10:16

I started a thread about ‘boring’ houses but I think I had not clarified my own thinking….

Im in late 40’s. We’re considering moving to a fairly nice but boring house, which would release a lot of capital from our current home.
some we will give to DC, but it would leave plenty to get one or maybe two BTL properties on short mortgages.

they would be paid off by the time I am in late 50’s and give a retirement income equivalent to my current income- I’m not planning to fully retire but I do want freedom when I’m older and to be able to help out DCs.

but it would mean a compromise now- a boring house in a good location but nothing to make one’s heart sing.

am I too young to make that compromise now? Or is it good to be planning ahead at this age?

OP posts:

NoBinturongsHereMate · 28/03/2024 16:59

Twoshoesnewshoes · 28/03/2024 15:55

@Chewbecca , thank you 🙏
I would have cash, from my house sale.
if I invest the £75k in a BTL which costs £240k, this would take 7 years to pay off the mortgage on the £135k rest.
after 7 years, at todays money, allowing £250 a month contingency, £200 management, £100 a month tax, I still have a net income of £2000 a month - obviously less some months if the boiler breaks or a gap in tenant.
the pension calculation in my previous post would give £2000k a month for 70 months, whereas the property is ongoing and my DCs inherit it minus CGT.
what am I missing?

You also need to add stamp duty, survey and legal fees to the initial payment.

Will your £240k house meet the coming energy efficiency requirements for rentals, or will it need upgrades?

And you seem to have miscalculated the tax. How do you get £100/month?

Elsewhere123 · 28/03/2024 17:04

If you want to move do it sooner rather than later. By 63 my health took a decided turn for the worse.

Original poster

Twoshoesnewshoes · 28/03/2024 18:33

BorgQueen · 28/03/2024 16:30

Yes but the amount you pay into a pension won’t remain static, presumably you’ll increase it to keep up with inflation every year.

Annuity calculators give a (low) average, age and health when you buy them affects the rate, you can buy term annuities where you get your money back after 5/10 years etc.
You also don’t have to buy an annuity, you can use flexible drawdown.

Paying in £500 a month gross, after a lump sum of £20k , increasing by 2% a year x 15 years at 8% growth gives you £250k, almost £200k at 5%.

I’d have a talk with an IFA if I were you to go through all the implications of owning / passing on rental properties regarding potential IHT and CGT.
Unless buying a new(ish) build or recently renovated, there are going to be major expenses at some point, new windows / doors / roof even.

DH does a lot of work for a couple of landlords with multiple properties and all they do is complain!

I was told to calculate on 4%, but yes it’s still a good idea - I guess I could put the lump sum into a savings account and release £500 a month as you say.

OP posts:

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