London Has Peaked

kteara

wotsthat wrote: »

Given we're apparently heading for a pensions crisis because so few are saving for retirement I find it difficult to believe that those with the foresight to save a house sized pension fund would pay tax at their higher rate to buy a house.

If they're the clever ones there's no hope for the rest.

Well its incredibly confusing for young people to know what to do. House prices seem to keep rising to the point where its become a falacy to own a decent house and a crappy 1 bedroom apartment will cost a lifetimes slavery.

All jokes aside though, honestly, what do you think someone in my position should be doing. I want to own a house but I can only save 500 a month and that will mean I have to wait until im 30 in order to afford a crappy flat. Do I even bother with a pension? I will only have access to 25% of it and the rest is taxed and taxed again upon my death. No wonder so many splash out their money on nice cars, atleast you know you can reap the benefits and enjoy it rather than gamble with saving for something unpromising.

wotsthat

Bubble_and_Squeak wrote: »

wow!
you must have a lot of time on your hands!
its a nice example of taking singular statements out of context and imposing your desired spin

Err.. nothing's out of context and only took 5 minutes - it's all in this or the 'tipping point' thread.

Bubble_and_Squeak wrote: »

they'll take the money out and give it to their middle class children to buy houses

You said there were only 9 property transactions in your target area in November. Just how much do you think the pension changes will increase this number by in April?

According to you (depending on which way the wind's blowing) the impact will be dramatic enough to make it worthwhile buying into a bubble. If it make sense to you fine but I'm still of the opinion that you are simply a househunter hoping for cheaper prices rather than someone whose views on the housing markets have any value.

Maikeru

kteara wrote: »

Well its incredibly confusing for young people to know what to do. House prices seem to keep rising to the point where its become a falacy to own a decent house and a crappy 1 bedroom apartment will cost a lifetimes slavery.

All jokes aside though, honestly, what do you think someone in my position should be doing. I want to own a house but I can only save 500 a month and that will mean I have to wait until im 30 in order to afford a crappy flat. Do I even bother with a pension? I will only have access to 25% of it and the rest is taxed and taxed again upon my death. No wonder so many splash out their money on nice cars, atleast you know you can reap the benefits and enjoy it rather than gamble with saving for something unpromising.

Where are you planning to buy? London is a different story but if you're talking about the rest of the country then your outlook seems a bit pessimistic.

chucknorris

kteara wrote: »

Do I even bother with a pension? I will only have access to 25% of it and the rest is taxed and taxed again upon my death. No wonder so many splash out their money on nice cars, atleast you know you can reap the benefits and enjoy it rather than gamble with saving for something unpromising.

You would have access to 100% of your pension, 25% tax free and 75% taxed (at your marginal rate). Because you claim tax relief when you invest you would almost certainly gain from the overall tax treatment of your pension. Splashing out your money on cars is gambling with your future much more than investing in a pension would be.

kteara

chucknorris wrote: »

You would have access to 100% of your pension, 25% tax free and 75% taxed. Because you claim tax relief when you invest you will almost certainly gain from the overall tax treatment of your pension. Splashing out your cash on cars is gambling with your future.

75% tax sets of huge alarm bells. So let's say I invested 100k overall I will only have access to around half given th tax I have to pay? Sounds ludicrous

wotsthat

kteara wrote: »

All jokes aside though, honestly, what do you think someone in my position should be doing. I want to own a house but I can only save 500 a month and that will mean I have to wait until im 30 in order to afford a crappy flat. Do I even bother with a pension? I will only have access to 25% of it and the rest is taxed and taxed again upon my death. No wonder so many splash out their money on nice cars, atleast you know you can reap the benefits and enjoy it rather than gamble with saving for something unpromising.

Personally I don't think your peers are splashing money on cars and flash holidays because houses are too expensive or because they think pensions are poor value. I think it's because they're thinking short term.

What I did was to buy something cheap that I could afford. I never entirely stopped making pension payments but they definitely fell down the priority list. What I would say is that you've vastly underestimated the value of a pension. Currently you'll get your tax back on contributions, get 25% of the pot tax free at 57 (ish) and the first £10k of the benefits taken will also be tax free.

I was lucky in that I bought in the Midlands when property was the cheapest it had been for a generation. Why can't you work and live somewhere else? It may be that when push comes to shove you'd rather live in a crappy flat in London instead. Doesn't make that flat bigger or less crappier but at least the choice is a positive one.

chucknorris

kteara wrote: »

75% tax sets of huge alarm bells. So let's say I invested 100k overall I will only have access to around half given th tax I have to pay? Sounds ludicrous

If you are a higher rate tax payer, then your £100k invested becomes £166.7k (obviously you can have to invest subject to the max annual allowance). It wouldn't be taxed at 75% it would be taxed as follows, assuming no growth on your £166.7k:


£167.7 x 25% tax free
£166.7 x 75% x your marginal rate of income tax (i.e. 20%, 40%, 45% etc.)


EDIT: The above does not include any employer contribution either! If we add that at say your employer matching your contributions then your £100k becomes:

£333k x 25% tax free
£333k x 75% x your marginal rate of income tax (i.e. 20%, 40%, 45% etc.)

and don't forget no growth has been assumed.

wotsthat

kteara wrote: »

75% tax sets of huge alarm bells. So let's say I invested 100k overall I will only have access to around half given th tax I have to pay? Sounds ludicrous

It's not 75% tax. 75% of the pot will be subject to tax after the first £10k tax free personal allowance.

Don't forget you won't have paid a penny of tax on the money you've put into a pension so think of it as a tax deferment. You'll be a higher rate taxpayer someday so you'll be getting tax relief of 40% on contributions and, if you manage it correctly, will be paying 20% tax on only 75% of the pot that exceeds £10k per year.

Why not peruse the pensions board? There are plenty of 'is it worth it' type threads that might help.

lisyloo

Kteara - you need to understand pensions better before making life changing decisions.

There can be benefits from
. Employer contributions (essentially free money)
. You might pay a lower income tax rate in retirement
. If your employer offers salary sacrifice you will save employees national insurance contributions
. If you employer is kind they may pass on some of the employers national insurance contributions.

A decent retirement IS worth saving for although it's all about balance.
By all means Have that nice car if you can afford it after you've taken care of your housing and retirement needs.
Ironically I've found the best way to have a few luxuries is to buy a house and then gave no mortgage/rent costs.

padington

Bubble_and_Squeak wrote: »

isn't prime depreciating?

No, transaction levels have been really high since the prices only recently dropping whilst in wooders transaction levels have been really low and the price has been soaring.

Following transaction levels doesn't give you the whole story. Cheaper property is currently a safer bet so the move is from prime selling finally very recently cheaper and value property's being held high.