Help with our investment

jamesd

Hmm, worth wondering whether your husband can defer the state pensions to get to £20k then use flexible drawdown of a pension. If I assume he'll get £140 a week / 7280 a year as he is now, he'd need to increase that by 34% to get over 20k. Three years of deferring would do it. He could probably do it with less deferring because normal increases in the teachers' pension may take him over the threshold.

Flexible drawdown can be handy because it lets you pay money in to a pension, get the tax relief, then take all of the money back out again. 25% tax free, the other 75% added to your normal taxable income, so you'd spread that out so you don't go into higher rate or lose age allowance, if that applies. I don't think age allowance will apply to your husband, though. Can't make any more pension contributions after using flexible drawdown. It's a nice way to benefit from some tax relief.

I don't know how well your own income is protected should your husband die first but given your own 11k income it may be worth looking to defer the state pensions to get you to a more comfortable independent guaranteed income level.

Another nice potential benefit of deferring the state pensions is that the result is guaranteed income that mortgage lenders like.

I do like your BTL plan, though not the way you plan to fund it. Hopefully you'll do the analysis I've suggested and become more comfortable with the cheaper funding option.

jem16

jamesd wrote: »

If I assume he'll get £140 a week / 7280 a year as he is now,

Probably unlikely to get the full £140pw as the Teachers' pension has been contracted out.

I don't know how well your own income is protected should your husband die first

TPS will give a half pension to the spouse.

jamesd

Good to read about the TPS, should do good things for your security. A State Pension Statement for him would be nice for planning. If he was a teacher for most of his working life he'll probably get little more than the Basic State Pension but you both probably know that already.

seven-day-weekend

I think his State Pension will be about £120 a week. He had a Pension Forecast last year. He didn't go into Teaching until he was 32.

Yes, both our Pension give half to the surviving spouse.

I thank you all for your valued contributions and will take on board what has been said. I can see that in reality it makes no difference in risk which property is mortgaged. It just feels risky. Maybe we will have to get over that.

Oh! One thing I've just thought of is that on our own house we can only have a twelve-year mortgage because of my husband's age (they will give us a residential mortgage until the oldest of us is 75 and based on our present income will only go to £35k). This obviously makes repayments more expensive - another reason why we thought a BTL mortgage might be better as it goes upon rental income as well as personal circumstances.

Thanks all once again.

jamesd

Age 75 isn't a restriction of all lenders so you might try checking others. I think some go to at least 85.

seven-day-weekend

Just one question for jamesd, if I may

I have mentioned to my husband about dererring his State Pension, he is quite interested.

Is the 10% increase you mention on just the basic pension or the whole amount? He was thinking that if he deferred it for a year, then if it was on the full amount that would make an extra £12 a week (index linked) on his Pension for the rest of his life. Is that correct?

jamesd

It's normally the whole amount: basic, additional and graduated retirement benefit and more. There's a list of what is and isn't included on page 18 of the deferring guide (PDF). He's correct.

seven-day-weekend

Thanks Jamesd, my husband is Very interested in this, we are giving it serious consideraton!