Options if you cannot afford a Private pension.?.

dunstonh

This should always be the priority IMHO , given the 2 state pensions are in the background. Having a house gives you considerable potential flexibility in retirement.

Given the potential for 4 state pensions (basic, graduated, serps and S2P) and that many people arent going to get anything other than the basic (self employed only get basic, contracted out occ schemes only get basic) plus the fact the Govt could pull S2P if they wanted to (already reduced it three times retrospectively) it isnt a good idea to rely on S2P.

You may be able to:

*trade down to a cheaper property releasing cash for investment to top up income
*get a lump sum or ongoing income from an equity release lifetime mortgage or home reversion scheme
*rent out a room to a lodger for tax free income
*rent out the whole house and go and live somewhere cheaper (eg up a mountain in Spain) for a few years until pensions kick in...

Trading down may not be an option if you are already in a small property or in a region where house prices are lower than national average (Suffolk and Norfolk fitting the bill there).
Equity release should be a fall back option not something you plan for.
Renting out a room isnt desirable
Living in spain may be desirable to some but others not and by the time retirement comes, house prices across europe could be more in line with each other than they are now.

All of these are really "failure" options. These are the last resorts and not the things you plan.

EdInvestor

There are plenty of people who can only afford one or the other: a pension or a mortgage.The mortgage wins hands down IMHO, not least because you would have to pay rent anyway, but owning a home gives the possibility of the additional options mentioned above.

Later when mortgage is paid off, the payments can be invested to provide extra retirement income on top of the state pensions.

Of course it would be ideal for everyone to be able to save for their retirment throughout their lives but we need to be realistic: what with student debt and the price of property these days, many families are going to be pushed, even with two earners.

dunstonh

There are plenty of people who choose not to afford retirement planning.

Are you reallly trying to convince us that a 25 year old cannot afford a £39pm direct debit to a pension scheme? Even a 30-35 year old starting at that level could still make a big enough improvement.

A 25 year old with a state retirement age of 68 paying £39 direct debit into a pension (increase it annually with inflation) would end up with a pot around the £154,000 mark. That would produce an income of around £7700 a year on top of state pension.

A 35 year old using the same as above would end up with a pot of around £74,000 giving an income of £3700 a year on top of state pension.

If you cannot afford £39pm then you shouldnt own a house as your budget should never be that stretched.

seven-day-weekend

EdInvestor wrote:

This should always be the priority IMHO , given the 2 state pensions are in the background. Having a house gives you considerable potential flexibility in retirement.

You may be able to:

*trade down to a cheaper property releasing cash for investment to top up income
*get a lump sum or ongoing income from an equity release lifetime mortgage or home reversion scheme
*rent out a room to a lodger for tax free income
*rent out the whole house and go and live somewhere cheaper (eg up a mountain in Spain) for a few years until pensions kick in...

Hey! Get your own mountain! This one's full!

seven-day-weekend

>>Renting out a room isnt desirable<<

Why not? We've done it when we were living on a student grant and on and off throughout our 35-year marriage. What's the problem??

EdInvestor

seven-day-weekend wrote:

Hey! Get your own mountain! This one's full!

LOL.

I thought you might like to rent out that shack you've got at the bottom of your garden

seven-day-weekend

EdInvestor wrote:

LOL.

I thought you might like to rent out that shack you've got at the bottom of your garden

We don't have a garden.....:rotfl: .

AUNTMAGPIE

Well I seem to have stirred up a hornets' nest here.


No, sadly I don't have lots of secret money stashed around, I have dreams about finding some, but alas I know that's what they are.


There used to be a saying about cutting one's coat according to the cloth available. Have to do that, won't we? If the getter out of debters and the frantic savers are anything to go by, it's possible. I have worked it out that it's possible, the major problem is if the roof falls in.