Is your pension pot going to be large enough?

chucknorris

Thrugelmir wrote: »

They may pay yours. But many recent investors are relying on capital growth alone. Its not possible to be tax efficient by offsetting mortgage interest against rental income , and repay the capital owing in the mortgage. As capital is repaid from after tax income. Many investors would be taxed at 40% if rental income wasn't offset by the interest.

Well that's their problem, I'm only responsible for my investments not theirs

ninky_2

chewmylegoff wrote: »

£100 in a pension growing at 5%pa would be worth £278 after 20 years and £432 after 30.

£60 in an ISA growing at 5%pa would be £159 and £259 respectively.

yes anything you draw from an ISA is tax-free, but that isn't going to rebalance that sort of disparity.

isn't it? you don't know what income tax will be by the time i retire.

chewmylegoff

ninky wrote: »

isn't it? you don't know what income tax will be by the time i retire.

this is, of course, a risk, but your ISA doesn't hedge you against changes in the tax system, because its status can be altered.

ninky_2

chewmylegoff wrote: »

this is, of course, a risk, but your ISA doesn't hedge you against changes in the tax system, because its status can be altered.

at which point i could take it out and invest it elsewhere with no penalties.

chucknorris

RenovationMan wrote: »

Only if you CHOOSE to buy an annuity. Conrad, your prejudices against pensions were completely valid 10, even 5 years ago but not anymore.

You can choose to lock your money away in an annuity and you will receive a guaranteed pension forever - nothing wrong with this, that's a pension is for, after all. If you dont mind a bit of risk then you can keep your pension in draw-down and live off the investment return and your next of kin get the pension when you die.

Youmay have missed my original query about what you will do with your property money when you cash in and retire. You will have a substantial amount of money that is NOT held in any sort of tax wrapper. You will therefore pay tax on your savings. You will also have to fund perhaps 30 years of retirement from these savings. Are you sure you will have enough to last, especially if you have to erode the capital?

I'm not Conrad!

I am not against pensions it's just that I now have much more than I need for my retirement so there is no point in locking money up in either an annuity or inside a pension wrapper.

Yes I have MUCH more than I need so I am very sure

chewmylegoff

ninky wrote: »

at which point i could take it out and invest it elsewhere with no penalties.

except that you cannot guarantee that, any more than i can guarantee what the future rate of income tax will be.

Conrad

RenovationMan wrote: »

If you dont mind a bit of risk then you can keep your pension in draw-down and live off the investment return and your next of kin get the pension when you die.

Youmay have missed my original query about what you will do with your property money when you cash in and retire. You will have a substantial amount of money that is NOT held in any sort of tax wrapper.

On your second point above - no I won't sell the properties as they generate income. The income is Taxed just as is pension income.

On point one about drawdown, I did look into this with some IFA's about 3 years ago and I came away with the impression it wasn't ideal but tbh I can't recall why.
I don't like people telling me what I can and can't do with my money, I like toal freedom and to pass the investments on unfettered.

I also did worry the anuity provider or indeed the pension fund itself may go pop in a very severe depression. Now you could argue tennants wont be able to pay rent in similar circumstances but there again I would have freedom to explore other options such as finding new tenants.

I'm not bearish but the thought of tying up my wealth with an insurance co / annuity provider or any such institution would be for me too much of a nagging worry.

Thrugelmir

ninky wrote: »

isn't it? you don't know what income tax will be by the time i retire.

You'll have a tax free personal allowance that won't be utilised by the state pension alone. Remember the tax free allowance increases every year so less of your pension income is subject to income tax.

For many people there is no tax efficiency with ISA's as the same investments can be bought outside the "wrapper" at less cost. I.E. there is no management charge for the ISA itself.

GeneHunt_2

dtsazza wrote: »

Pensions are merely a tax wrapper, and as such they're a decent place to hold assets for retirement. They're a great place if you're a higher rate taxpayer and/or if your employer matches contributions.

True, many high street pension products charge relatively high fees for relatively low performance. Don't use them then - get a self-invest pension, or hold the money as cash instead.

Most companies don't provide a choice. You have to use the scheme they tell you to, even if it's rubbish.

IveSeenTheLight

chucknorris wrote: »

My wife and I were talking about how much you need/want when you retire and we concluded about 16k (gross) a year. But we then wondered if most people will have this, as 5k of that is state pension (using a single persons rate because you cannot guarantee that your partner will live as long as you) so you need 11k of top up pension.

In a DC (defined contribution) pension that would mean a pension pot of about 285k. That's quite a sizable pension pot to have accrued.

I'd much rather utilise the £285k in my bank account than get a pension of £11k per year.
It would be 26 years (not considering interest achieved in that period) before the pot ran dry.

As my retirement age is 67 according to the government, I'm not expecting to live beyond 93 and would rather enjoy more in my early retirement days whilst needing less further on.

To answer your query though, I'm in line to far exceed that £285, via my various investments, however I'm not resting on my laurels and want to expand my investments further to cover for any other issues which may rise in life.