Big house or pension?

[WhichHoose]

If you had a budget that could buy you a really nice house, would you go for a nice house or a more modest home (that still met your needs, but only just) and put the rest into your pension?

My pension pot is about £1k due to extended ill health and I'm 36 so while I really want a nice house, I'm scared of getting used to the space/comfort then having to leave it when I retire to fund my retirement!

My budget is £375k (North of England) and the houses that would just about meet my needs are £170k with repayments of around £300 a month with the deposit I have (£130k).

WWYD?

Pension, we prioritised this over a big house plus there are the running costs to consider.DS will be moving out this year so now we will have his room back.

The other thing about downsizing is that sometimes people just don’t have the energy or there are too many memories in the house so they don’t want to leave.

This. Do you fancy having to go out to work full time until you're 71? It could well happen. I'd buy a house that meets your needs now. You can still make it lovely inside. I'd pay as much as possible into my pension. I'm old at 62, and I'm so glad I could retire at 57. I'm not in good enough health to work full time anymore.

I'd do as we did, buy the most expensive, over pay the mortgage, invest in solar/insulation/future proofing house from energy bills, and then pension.

I'd go with the ex council house and put more in pension. Or, look to move where there's more housing stock?

I had this dilemma and went for the pension.

Pension

Also look at a LISA if you don’t already have one.

Before the law changed so employers had to do pensions, I was only doing low-paid jobs which didn't offer pensions. Since the law changed, I've mainly been self employed.

My income is likely to increase quite a bit as I move up in my career (I'm in the same thing I was doing self-employed but at a higher level) as the next step is management.

Do you have kids?

You don't want to have to buy a house and then move because it's too small for a growing family, for example

Staying in the same house for a long makes financial sense

Ah that makes sense. My theory is workplace pensions are a way of the government privatising the state pension so they can phase it out for all but the poorest. As I said, I wouldn’t rely on it sadly.

Some great advice above. I overpaid into my pension from age 30 and by luck (stock market) accumulated enough to retire at 50. It helped that we minimised our living costs. We downsized into an ex-LHA 1950's semi. It's great. Bigger than most new builds, close to town centre, bigger garden than new builds, council tax band B. We didn't need much pension to live on day to day.

I do accept that we were very lucky to live through a relatively benign economic environment and were able to buy our first homes at very sensible income ratios. Today's youngsters are having to overpay for homes at income ratios that are not fair.

Absolutely this.

My budget is £375k (North of England) and the houses that would just about meet my needs are £170k with repayments of around £300 a month with the deposit I have (£130k).

With your budget you could buy two houses and still have 35k left over. Live in one, rent one out to cover costs/ provide income and put the 35k into a pension fund.

When you retire you sell the house you live in and move into the second house and have a pension. If you sold the house you live in and moved into the second house I don't think you'd pay capital gains tax.

Over the last 30 years of my employment I'm sure the value of my house increased by more than the value of my pension.

@XVGN - I am glad things worked for you, it’s really refreshing that you acknowledge that luck played a part and that the generations after you have it harder, I don’t hear that level of self awareness about this often enough, so thank you!

Yes we have 2 kids and we're moving areas because we can't afford any house at all where we are now (London) and I'd like them to have a bedroom each whereas right now we can't even move one child out of a cot due to the size of our tiny rental flat here. I don't want to accidentally buy a house that's too small but at the same time I don't want to over-buy because we've been dreaming about more space for so long! I keep thinking we're affording the rent here and could go up to that, but at the same time I really like the idea that we could have far less expenditure and save for our future (and theirs).

We are moving to this area as I have family support (invaluable) and we will get free childcare with DH's new job, as well as houses being about 1/3 of the price of London where we are now. I know the area very well as I grew up there so I know the council estates are fairly ok places on the grand scheme of things. Just not spectacular or exciting.

I think future children is the one thing pushing me towards the 4 bed house, but realistically we are very unlikely to have a third for a bunch of reasons.

I've been considering splitting the deposit and doing this as fixer uppers are around £90-£120k around here. Rental yield is fairly low in areas with cheap houses, though so I'm not sure it's a great path unless we can buy more properties further down the line.

Pension, especially if the government are eyeing up an increased state pension age of 68/68+

This is just ‘head in the sand’ though. Most of my relatives have lived until their 90’s and I’ve seen what a poor retirement looks like. It’s awful.

Thank you. Yes a lot of folk my age don't understand how lucky we were and can't see why today's youngsters don't just give up the Costa coffee and avocado on toast and just buy a house.

Thank you very much everyone, it seems fairly unanimous that pension is better than house. This was my gut feeling but I wanted a sanity check as I wasn't entirely sure I was on the right lines with it all.

The pension calculator I did told me I need to contribute at least £450 a month to my pension now to have a modest standard of living when I retire. When I take out my work pension contributions (between me and employer and tax) of about £200, that means I need to at the very minimum add £250 a month (or ideally, more). I'm not sure if any of those calculators account for inflation though as they're saying £14k a year will be liveable, but IDK it will be in 35+ years' time.

I'm guessing that it is showing values in today's terms - not inflation adjusted. This gov funded site may be useful to some people.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot

£14K doesn't seem to match up with the recent news reports, and will definitely assume that you have paid for accommodation, i.e. a house paid off.

https://www.bbc.co.uk/news/business-68222807

I'm not sure I agree with the majority of responses. You are moving for a better house and quality of life. So no point buying the house you don't want..

I think you should check this out with a good financial adviser.

Pension. We have friends with no pension and cracking house, they always said theitnjouse was their pension and they’d downsize. Now coming up to pension age their big house is worth less than our two pensions and they still need somewhere to live. They also still have a mortgage on it.

I can’t even begin to think how much extra interest they paid on a big mortgage and how much saved income tax they have lost by not adding to a pension.

@Dapbag if she bought a house and didn’t live in it she would be liable for capital gains tax when she sold it for any gain in value whilst it wasn’t her main residence.