Apparently pensions aren't worth it?

Mnd

luckyduck83 wrote: »

This is definitely true. I've tried to start a pension a few times over the last couple of years and just find it a minefield and give up.

Interesting advice so far. I'll do some reading...

It's not complicated. Do your reading, ask here (I suggest you start your own thread) and look after your future

Anonymous101

I really can't understand when people say pensions are difficult to understand. Its as if they begin looking at it and because its not immediately obvious they give up. When the reality is that just a small amount of reading will have you understanding the majority of what you need to know.

In terms of a time investment, a day or two's work on understanding pensions would IMO be the best investment most people could ever make. It'll save you thousands if not tens of thousands of pounds over your lifetime.

To say that they "apparently" aren't worth bothering with is both extremely naive and lazy beyond belief.

OldMusicGuy

luckyduck83 wrote: »

This is definitely true. I've tried to start a pension a few times over the last couple of years and just find it a minefield and give up.

It's really easy to start a pension, it's not a minefield and it's very straightforward. What is more complicated (and will take more thought and research) is how you invest the money you put in the pension. That's the part that many people find a bit confusing/concerning. And that's where the default position of "I don't trust the stock market but am happy to buy property because I can touch it" usually comes in to play.

There's some good basic information here: https://www.moneyadviceservice.org.uk/en/pensions-and-retirement

I found this book helpful: "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards.

Do refer to the linked post that xylophone quoted earlier.

luckyduck83

Mnd wrote: »

Ignore your mates and start investing in you pension. You will get massive help from this site if you ask..if you can put in 20k you will get £5k tax rebate added to that.

Repeat 10 times in the next 20 years and there's 250000 without any investment growth.

Then your only problem is you will be retired but won't have anyone to go for a lunchtime pint cos all your mates will still be working..

Am I right in thinking that £250,000 will give me just £20k pa before tax?

MallyGirl

It depends - are you looking at buying an annuity, or at drawing down at a safe withdrawal rate so that you don't run out of money even if you live to 110?

SWR is maybe 3.5% so £250k would support continued drawdown of £8,750 pa for potentially 50+ years.

luckyduck83

MallyGirl wrote: »

It depends - are you looking at buying an annuity, or at drawing down at a safe withdrawal rate so that you don't run out of money even if you live to 110?

SWR is maybe 3.5% so £250k would support continued drawdown of £8,750 pa for potentially 50+ years.

SWR? (post is too short so adding this to make it longer)

gdrforest

At today's annuity rates you would get about £10k from a £250K pension pot.

If you are paying yourself from your own Ltd company then that company can make pension contributions to your pension which would be free of Employee and Employer NI, Corporation Tax and Income tax.

MEM62

luckyduck83 wrote: »

Am I right in thinking that £250,000 will give me just £20k pa before tax?

It is not as simple as that. You need to consider many things before you decide what return you can take from your pension. At what age will you retire and what level of income do you need to support your lifestyle are just for starters.

Things like mortgages, kids, saving for retirement and other expenses should be gone by then. So you then need to look at what income you will need to pay the bills and do anything else you want to do. (Holidays, new car once in a while, repair and upkeep of your house, any expensive hobbies etc etc etc)

If you are going to retire at 70 and expect to live to 80 (ie 10 years of retirement) you can draw more than £25k a year from that fund. If you want to retire at 50 and live to 90 (a 40-years span) you'll be drawing a lot less.

Getting the theory so far?

A 'safe' drawdown percentage is considered by some to be 4% if you want your money to last over an average retirement life. That would give you an income of £10,000.

It is not an exact science as they are many variables. Nobody can predict what inflation rates will be over the coming years or how well investments will do. One thing is for certain though, save nothing and you will be living in poverty so make the best provision you can.

AnotherJoe

No you are not. As the saying goes "you aren't even wrong". Nowhere near that.
It's £250k. So use some simple maths, It would pay you £250k for one year onky (minus a tremendous amount of tax ) and then it's gone. Or 25k a year (subject to much less tax) for ten years or £12,500 for 20 years. And so on. Then potentially add something for growth so it should last a bit longer.

If you had 250k in a house you were letting, it would pay you whatever the rent was. Maybe £750 a month or £9k a year. Minus tax. Minus voids. Minus expenses. Minus routine wear and tear. Plus hassle. Probabiy £5-6k anyear in reality. £9k a year from £250k invested would have minimal costs minimal hassle and probabiy last 30 plus years.

( Why would you think if you had a lump sum of £250k someone would give you £20k a year indefinitely ? Something you read )?

Terron

I have both pensions and BTL.


It is simple to take out a pension - just hire a IFA to do it. Understanding pensions is much harder, though in my case that is because I have several pensions from different times with different rules.



I find BTL to be simpler. I use letting agents to manage the properties. Rhe thing is there are two main ways to go with property. You can invest for capital growth or for income. The former has been better for building wealth, but I have gone with the latter as I needed to replace my income after losing my job. I make on average 8% ROI net of all costs. Stubod's 4% would be too low for me to consider, and I am not worried about prices remaining fairly static. I had a significant rise on many of my properties last year but that is just a bonus,



Pensions are less liquid than property if you are under 55.


ZX81 is right that being a landlord is not for everyone., bu givingin it a try is the best way to finf out.


I haven't found tax to be a major problem, as I have been a basic rate tax payer for most of my time as a landlord.paying about 10% of my total income in tax. I drew a little (£5k) from one pension last year, tax free..



That said I would go for a pension first.. Yes you need what seems t be a massive fund to get a large payout, but a small payment invested for 20+ years can grow a lot. Also the standard projects use unrealistic assumptions about how you will us e a funs,, assuming that you will get an annuity which will give a smaller number that you can get with other methods.


£20k seems a decent start. It might allow you to retire a year or two early, or supplement your state pension, or provide a tax free inheritance.