Unofficial end of stakeholder pensions? RU64 being withdrawn.

dunstonh

There are already reports of significant numbers not declaring their rental income for tax purposes and not aware that they will be hit with a CGT bill upon sale.

A 2% rise in interest rates would cripple a large number who could not afford such an increase.

EdInvestor

A 2% rise in interest rates would cripple a large number who could not afford such an increase

Lucky that the next change should be downwards then.:)

Pal

Look at the short term and the long term can take care of itself, eh Ed?

EdInvestor

Not really

The semi permanent nature of the "low interest rate/ low inflation" environment is pretty well accepted, especially in the financial services industry, wouldn't you agree?

With major central banks all now mandated to track inflation rates and take action to keep them low, it seems pretty unlikely we'll be treated to a return to 1970s style inflation and high interest rates any time soon.

Which is not to say you shouldn't take inflation into account over the long term - particularly when looking at retirement income products which have to last an increasingly longer time (or so the actuaries say). A level annuity will lose almost half its spending power over 20 years at current inflation rates, so you could imagine what would happen if double digit rates made a return. :eek:

Level annuities are potentially quite dangerous products, IMHO.

EdInvestor

dunstonh wrote:

There are already reports of significant numbers not declaring their rental income for tax purposes and not aware that they will be hit with a CGT bill upon sale.

Most BTL investors have an I/O mortgage so won't need to pay tax on the rental income.I'd also doubt that many who bought in the last couple of years have made much in the way of a taxable capital gain (if any). CGT allowance before tax comes in is 8,500 (X2 if property is in two names).

dunstonh

A level annuity will lose almost half its spending power over 20 years at current inflation rates, so you could imagine what would happen if double digit rates made a return. :eek:

Level annuities are potentially quite dangerous products, IMHO.

A level annuity will pay more than an increasing one for around 7 to 13 years. It can then take another 7-13 years to make up the difference. Many people may feel that having an increasing annuity that could take 14-20 years or so to break even is not worth it. Plus a lot of the spending is done in the early years of retirement and reduces as they get older.

So, although I understand where you are coming from, it's not dangerous.

Most BTL investors have an I/O mortgage so won't need to pay tax on the rental income.

The only way they wont pay income tax is if they are making a loss (or break even). If they are not making any profit out of it and are on interest only basis, you have to question if it is really a suitable investment.

cheerfulcat

dh, I have a funny feeling that a lot of recent BTL-ers are finding out that it isn't a suitable investment.

ReportInvestor

Why?

Rental yields are looking a whole lot healthier now Bradford & Bingley shares are yielding less than 4% rather than over 5%.

And indexed linked government stock is yielding next to nothing above inflation these days.

And gilts & PIBs & Corporate Bond yields are all exceptionally low.

Where else is an honest toiler supposed to get their inflation proofed income?

cheerfulcat

Reportinvestor, I can only speak for the market where I live; we are massively over-supplied with new build flats, which is mostly what newbie BTL-ers buy in my area. You can name your price, if you are renting or buying. And I'm in one of the few parts of the UK where house prices generally are still rising.

ReportInvestor

cc, I agree that it's always a laff to discuss "off plan" prices with any of these racketeers.

That was one reason Portman BS pulled out of new build buy to let.