Pension v property

kidmugsy

AnotherJoe wrote: »

There’s nothing magic about property.

Oh come now! Everyone knows you can't go wrong with bricks and mortar.

Terron

I have pensions and property. I expect to start drawing my pensions in 18 months. I went into property to provide an income to cover the time from when I lost my job until when I start taking my pensions, using savings and an inheritance.

I have been getting a return of over 7% net from my properties, some worse some better, One of the worse is a former home I kept in the home of getting capital growth which appears to have happened. I plan to sell that when I take my pensions to avoid the new tax and pay down mortgages on other properties. I had the advanatge of having grown up in an area with high rental returns and still having contacts there,

Despite property working well for me I would chose the LGPS if I had a choice. I have more moeny in my pensions than in property. I do have a DB pension (1/60th per year) and a DC pension with a DB underpin (1/80th per year) on part. Together they should give me about 13k a year.

My feeling is go for a pension first if DB or matched by your wmployer, then go for an ISA. If you still have moeny to invest then try property and see if you like it, but be wary of the risks and the hundreds of laws and regulations a landlord has to comply with.

lisyloo

A rental could bring in £850 a month and once paid could be sold and the proceeds banked.

Have you factored in

transcation costs e.g. stamp duty, estate agents fees on sale, legal fees, removals
taxes - income tax, cgt
upkeep
insurance
the work involved
agency/legal fees
The cost of tenants wear and tear (higher than owners) and keeping it up to a high standard
voids (empty periods with no rent)

On the qualitative rather than quantative side have your considered
the work involved in all of the above
getting called by a tenant at 4:00a/m?
being on call for breakdowns?

Personally I'd go for the pension

ManofLeisure_2

Property comes with a warning - Capital Gains Tax - which in my experience is often overlooked.

Terron

ManofLeisure wrote: »

Property comes with a warning - Capital Gains Tax - which in my experience is often overlooked.

There may be no problem with that depending on what you are doing. If you are flipping properties then obviously it is important.
If you are using properties to provide an income from the rent as a form of pension with no intention of selling you can ignore it as it goes away when you die. Apart from my former home for which PPR applies that is what I am doing.
Then there is the method of investing for capital gains, but profiting from them not by selling but by remortgaging. That used to avoid all tax until you died, but the new Section 24 makes it more difficult.

woolly_wombat

Terron wrote: »

I have pensions and property. I expect to start drawing my pensions in 18 months. I went into property to provide an income to cover the time from when I lost my job until when I start taking my pensions, using savings and an inheritance.

I have been getting a return of over 7% net from my properties, some worse some better, One of the worse is a former home I kept in the home of getting capital growth which appears to have happened. I plan to sell that when I take my pensions to avoid the new tax and pay down mortgages on other properties

The good news is that you will be able to minimise the Capital Gains Tax due on the sale of your former home through:

1. Private Residence Relief for the time you lived there
2. Letting Relief (up to £40,000)

Explanation and examples here:
https://www.gov.uk/tax-sell-home/let-out-part-of-home

There appears to be widespread awareness of Private Residence Relief but Letting Relief can also be very valuable.

woolly_wombat

ManofLeisure wrote: »

Property comes with a warning - Capital Gains Tax - which in my experience is often overlooked.

Particularly as CGT is now charged at a higher rate on residential property than on other assets:

https://www.gov.uk/capital-gains-tax/rates

Fortunately there are opportunities to minimise CGT on the sale of any property that has been a principal private residence:

https://www.taxcafe.co.uk/resources/theprincipalprivateresidenceexemption.html

See also #27.

Fireflyaway

Or maybe just stick extra money in the bank? Sure it won't make much based on today's rates but there is no risk / hassle involved as there could be with a property. Saving £1500 a month would mean a sum of nearly 400k saved by age 60. That over £1000 a month if you live till 90! But then again £1000 probably won't buy much in 20 years time....

BucksLady

ManofLeisure wrote: »

Property comes with a warning - Capital Gains Tax - which in my experience is often overlooked.

You should have found yourself a better accountant

TheShape

Why not consider a LISA? Approx £333 a month would fill your LISA subscription each year. Then decide what to do with the rest, possibly a S&S ISA, high interest current accounts and regular savers.