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  • FIRST POST
    • GT1979
    • By GT1979 10th Oct 17, 1:16 PM
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    GT1979
    Pie in the sky pension question
    • #1
    • 10th Oct 17, 1:16 PM
    Pie in the sky pension question 10th Oct 17 at 1:16 PM
    I wanted to pick your collective brains, if I may. Currently I'm living and working in London but want to explore my options for moving out into the country and changing down a few gears in the medium term. Some details:

    - I'm 37 and currently earning around £50,000pa.

    - I have £30,000 in a previous work pension and 18 months in a DB pension. Current work pension is just getting started.

    - I own a flat worth around £290,000 with a mortgage of £100,000.

    - Savings of £15,000 in a cash ISA.

    If I wanted to move somewhere and buy a modest house for around £220,000 and have a small income of £10,000 what would be my best strategy and how soon could I do it?
Page 1
    • bigadaj
    • By bigadaj 10th Oct 17, 3:43 PM
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    bigadaj
    • #2
    • 10th Oct 17, 3:43 PM
    • #2
    • 10th Oct 17, 3:43 PM
    Your current flat equity isn't far off the house value so that should be attainable in the near future.

    In terms of generating an income of £10k then a rule of thumb is that investing will yield 3.5% sustainably, ie likely to grow with inflation. This would suggest a necessary pot of around £300k, and ideally more as a couple of years in cash is if ten recommend to ride market turbulence.
    • kidmugsy
    • By kidmugsy 10th Oct 17, 3:48 PM
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    kidmugsy
    • #3
    • 10th Oct 17, 3:48 PM
    • #3
    • 10th Oct 17, 3:48 PM
    If you're planning to earn £10k p.a. in future at least contribute enough to your pension now to avoid the 40% tax rate. Do you really think you'd be happy to try to live on £10k p.a.?

    If you mean that you want an investment income of £10k p.a. then you're nowhere near rich enough. Years of saving and investing would be required. Anyway, why aren't you attempting to live on £10k p.a. (plus mortgage payments) now?
    • DairyQueen
    • By DairyQueen 11th Oct 17, 12:22 AM
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    DairyQueen
    • #4
    • 11th Oct 17, 12:22 AM
    • #4
    • 11th Oct 17, 12:22 AM
    The cost of your house move would take a biggish chunk of your current ISA savings. It's unlikely that even a small mortgage could be funded on £10k p.a. You would therefore need an additional £25k/30k in savings before you could buy that £220k house mortgage-free - more if you want a cash buffer.

    Assuming that you are able to achieve this before house price inflation moves the financial goal posts then you could consider taking-in lodgers. That would go some way to achieving such a modest, unearned income. However, you would likely need to work part-time in order to finance any income deficit, and in order to earn sufficient NI credits for a full SP. Such an income would be too low to fund capital expenses.

    As has been mentioned it would require a few hundred thousand in capital to finance even that modest income allowing for inflation. That few hundred thousand takes many people until their 50s/60s to accumulate and is required in addition to SP to keep them off the breadline.

    It isn't cheaper to live outside of London if you are mortgage-free. kidmugsy's suggestion is sound; try and live off £10k for 6 months and then review your definition of a 'modest' income. Don't shoot the messenger/s but I think that your goal is unachievable unless you define the medium term as 15/20 years, and you are prepared to save a good chunk of your income into a pension throughout. That 40% tax incentive is a no-brainer
    • Silvertabby
    • By Silvertabby 11th Oct 17, 9:20 AM
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    Silvertabby
    • #5
    • 11th Oct 17, 9:20 AM
    • #5
    • 11th Oct 17, 9:20 AM
    Live comfortably on £10K per year - I don't think so!

    That's just £833 per month. Council tax, utilities, house insurance, etc will take a good chunk of that.

    It's only houses that are cheaper outside London - everything else costs about the same.
    • greenglide
    • By greenglide 11th Oct 17, 10:32 AM
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    greenglide
    • #6
    • 11th Oct 17, 10:32 AM
    • #6
    • 11th Oct 17, 10:32 AM
    It isn't cheaper to live outside of London if you are mortgage-free.
    It's only houses that are cheaper outside London - everything else costs about the same.
    I think I would have to disagree with that.

    While the major difference would certainly tend to be in housing costs there is also a significant difference in day to day living costs outside London and the south east.

    The OP hasn't said where the would move to but there are plenty of places in the rest of the UK where £220,000 would buy more than a "modest" house!
    • mgdavid
    • By mgdavid 11th Oct 17, 11:19 AM
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    mgdavid
    • #7
    • 11th Oct 17, 11:19 AM
    • #7
    • 11th Oct 17, 11:19 AM
    Surely utilities and normal standing bills (gas, elec, coal & logs, council tax, sewerage & water rates, buildings & contents insurance, vehicle tax, insurance & fuel, TV licence, mobile phone, broadband, club memberships & subscriptions) all cost pretty much the same nationally? Perhaps varying by single-digit percentages.
    Surely you'd need to see savings of 25% - 50% on a few of the above to make a substantial difference to the annual income required.
    Arguably living out in the sticks could cost more for some things (CH oil, bottled gas) ?
    It all points back to 'the Number'...
    A salary slave no more.....
    • Bravepants
    • By Bravepants 11th Oct 17, 11:34 AM
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    Bravepants
    • #8
    • 11th Oct 17, 11:34 AM
    • #8
    • 11th Oct 17, 11:34 AM
    You can get a good quality terraced house up in the Lake District, near Whitehaven, for around £80k, cheaper if you are prepared to "do it up". Our friends sold up from Essex and moved up there.
    • scaredofdebt
    • By scaredofdebt 11th Oct 17, 12:04 PM
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    scaredofdebt
    • #9
    • 11th Oct 17, 12:04 PM
    • #9
    • 11th Oct 17, 12:04 PM
    As suggested, plenty of parts of the country where you can buy a "modest" house for a lot less than £220k. Parts of Wales, the North East etc.

    I live in the North East and you can get a perfectly reasonable terraced house ready to move into for about £40k, there are even cheaper areas than that, try Hartlepool for example.

    If you use less of the £220k for the house, that gives you more to use to earn an income.

    I have a friend who has a BTL property in the North East, paid £42k for it and rents in out for £395 pcm, that's a yield (gross) of around 11%, so in theory you could earn your £10k income with BTL properties worth around £90k.

    Obviously there are risks involved with BTL but it's worth consideration.
    • Silvertabby
    • By Silvertabby 11th Oct 17, 12:09 PM
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    Silvertabby
    Council tax for our Band E house (nowhere near London) is just under £19K.

    Band E for:

    Kensington and Chelsea = £1298.03

    Tower Hamlets = £1523.89
    • enthusiasticsaver
    • By enthusiasticsaver 11th Oct 17, 1:50 PM
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    enthusiasticsaver
    I think I would struggle to live off £10k per annum. Most houses even in cheaper areas of the country would be minimum £1000 council tax so that is 10% gone already. Once you add on utilities, food, travel and everyday living expenses even without a mortgage it would probably eat even further into costs but if you are willing to sacrifice holidays and don't go in for expensive cars it may be doable. Presumably you would be looking for part time work so researching areas where this is plentiful would be wise. It depends on your areas of expertise as to how feasible this is unless you are going to look at seasonal work only so touristy areas.

    You are very young though and have not yet built up significant pension savings so I think I would be reluctant to give up a good paying job at this precise time before really planning financially for it. Try and live on £10k per annum, it really is not that much cheaper outside London or certainly not in the south of the UK. I have no experience of North so maybe it is cheaper to live up there.
    2 weeks to go until early retirement in December . Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • enthusiasticsaver
    • By enthusiasticsaver 11th Oct 17, 1:55 PM
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    enthusiasticsaver
    Council tax for our Band E house (nowhere near London) is just under £19K.

    Band E for:

    Kensington and Chelsea = £1298.03

    Tower Hamlets = £1523.89
    Originally posted by Silvertabby
    I presume you mean £1900?

    I don't think OP would get a band E house for £220k anywhere in the country. That would be more like a band C. Our Band D house in Cornwall is £1700 per annum. I am surprised at how low that council tax is for London boroughs though.
    2 weeks to go until early retirement in December . Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • scaredofdebt
    • By scaredofdebt 11th Oct 17, 2:11 PM
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    scaredofdebt
    I presume you mean £1900?

    I don't think OP would get a band E house for £220k anywhere in the country. That would be more like a band C. Our Band D house in Cornwall is £1700 per annum. I am surprised at how low that council tax is for London boroughs though.
    Originally posted by enthusiasticsaver
    My house is band "F" and the neighbours house is too. It was bought for £227,500 a couple of years back, the decor was a bit dated and the vendors wanted a quick sale, but still. There are cheaper areas than mine in the country too - I live near Barnard Castle in Co Durham, ie the North East.

    My Council Tax is £3,200.
    • bigadaj
    • By bigadaj 11th Oct 17, 2:35 PM
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    bigadaj
    I presume you mean £1900?

    I don't think OP would get a band E house for £220k anywhere in the country. That would be more like a band C. Our Band D house in Cornwall is £1700 per annum. I am surprised at how low that council tax is for London boroughs though.
    Originally posted by enthusiasticsaver
    Council tax banding depends on the area, the actual value will vary hugely dependent on the local market.

    It's also very much cheaper in London, pound for pound, partially due to the fact that the concentration of housing in London makes many council spend aspects much cheaper and also a legacy political issue, just think what happened when Shirley porter managed to get away with for many years.
    • martinsurrey
    • By martinsurrey 11th Oct 17, 2:47 PM
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    martinsurrey
    I am surprised at how low that council tax is for London boroughs though.
    Originally posted by enthusiasticsaver
    London councils make a LOT of money out of parking, and the richer boroughs dont have as many spending needs.

    Westminster is only £600 for a band D house, they also get around £40m in parking revenue...
    • Terron
    • By Terron 11th Oct 17, 5:11 PM
    • 112 Posts
    • 115 Thanks
    Terron
    For a few months in 2014 I was living on £900 a month in Reading. It was enough for day to day living but I was having to tap savings for yearly expenses like MOT. So I don't think 10k is quite enough to live on.

    I have since moved back to the North West. I have quite a nice 3 bed end-terrace house in a conservation area on the edge of the Peak District I paid ~£180k. My current income comes from letting properties. This year I bought a recently refubished 2 bed terrace for £90k.

    Note heating costs are likely to be a bit higher in the North.

    You could very likely achieve you target when you get your, but I guess you are looking at doing it earlier. Pensions can cover from 55 onwards currently. That may be increased later, but existing schemes might well be allowed to continue starting at 55.

    To retuire before then you would require other savings to cover the gap, but I would look to get a pension to cover 55 to SP age first.

    Actually first I would get a stocks and shares ISA to replace your cash one.

    Then pay as much as possible into pensions until you have added £100k.

    The review how things are going.
    Last edited by Terron; 11-10-2017 at 5:15 PM.
    • Silvertabby
    • By Silvertabby 11th Oct 17, 9:18 PM
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    Silvertabby
    “ Council tax for our Band E house (nowhere near London) is just under £19K.

    Band E for:

    Kensington and Chelsea = £1298.03

    Tower Hamlets = £1523.89
    Originally posted by Silvertabby
    I presume you mean £1900?

    I don't think OP would get a band E house for £220k anywhere in the country. That would be more like a band C. Our Band D house in Cornwall is £1700 per annum. I am surprised at how low that council tax is for London boroughs though. Posted by enthusiasticsaver
    Sorry - our £19K is per annum, so £1900 per month (over 10 months). Kensington and Tower Hamlets curtesy of google.

    Our (band E) house is probably worth about £300K so council tax for a £220K house in our area would probably be on a par with London.
    • bigadaj
    • By bigadaj 12th Oct 17, 4:07 AM
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    • 7,098 Thanks
    bigadaj
    I presume you mean £1900?



    Sorry - our £19K is per annum, so £1900 per month (over 10 months). Kensington and Tower Hamlets curtesy of google.

    Our (band E) house is probably worth about £300K so council tax for a £220K house in our area would probably be on a par with London.
    Originally posted by Silvertabby
    You are paying £1900 per month council tax?

    I'd check your figures and definitely appeal if they are correct.
    • GT1979
    • By GT1979 12th Oct 17, 8:56 AM
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    GT1979
    Lots of food for thought there. Thank you. Some clarifications:

    - I'd hope for income of £10,000 but would work part time soon something more enjoyable and stress-free than current situation.

    - I do live relatively frugally now. Save quite a bit and regularly knock a bit off the mortgage.

    One question: when people say the 40% pension relief is a no-brainer, what do they mean? Previously I've had a DC pension while earning much less and a DB pension. My new job is currently organising a pension scheme (new company so isn't sorted yet - should start by December) and I'm unsure what they'll contribute. What is the 40% relief and is there a min/max that I should put in myself to avoid some pitfall?
    • Silvertabby
    • By Silvertabby 12th Oct 17, 10:03 AM
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    Silvertabby
    You are paying £1900 per month council tax?

    I'd check your figures and definitely appeal if they are correct. Posted by bigadaj
    Senior moment - well spotted! £1900 per year !
    Last edited by Silvertabby; 12-10-2017 at 10:05 AM.
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