Pension vs property

David_watts_2

Hello.
I am thinking of taking all the money out of my 200k pension pot and buying two houses to rent out, the income from the two houses per year is double what the predicted income from the pot is as it stands at the moment and the original 200k is safe in bricks and mortar.
What do you think

MallyGirl

my first flat was a reposession. I am sure that the previous owner thought that bricks and mortar were safe but he bought it for £66k and I bought it from the bank for £44k.
Property can have a place in a portfolio but I certainly wouldn't put all my eggs in that basket.

Tight_Fart

You'll have a lot of tax to pay on the 200k.

MEM62

I think that it is an awful idea.

If you are over 55 and can access your pension money you will be hit with a large tax bill.

If you could negate those two problems your next issue is that property is not suitable as a stand alone investment. It is not tax efficient, the returns do not (usually) beat the stock market and the fact that you cannot easily liquidate your assets should you need to being just three reasons. Also, what experience have you of being a landlord? Have you considered all the costs - repairs, agency fees, void periods, nightmare tenant, income tax. And what makes you think that your money is safe in bricks and mortar?

I really do not see why people look at property as the holy grail of money making. Perhaps too much daytime TV. Homes Under the Hammer anyone?

[Deleted User]

I have a BTL as part of my retirement planning but in all honesty I am selling it on retirement. Its not that I have trouble with tenants I have had good long term tenants but there is more and more legislation coming in that just makes it one big headache and I want simplicity for my retirement.


Personally I think your idea is not a good one.

coyrls

David_watts wrote: »

Hello.
I am thinking of taking all the money out of my 200k pension pot and buying two houses to rent out, the income from the two houses per year is double what the predicted income from the pot is as it stands at the moment and the original 200k is safe in bricks and mortar.
What do you think

I think you haven't thought it through, that you don't understand the tax implications of taking all the money out of your 200k pension pot, that you don't understand that house prices can go down as well as up and that you don't understand what your income from buy to let would be after deductions.

dunstonh

I am thinking of taking all the money out of my 200k pension pot and buying two houses to rent out,

That is very generous of you. I am sure all the taxpayers here will thank you for your generosity. However, its a dreadful idea.

the income from the two houses per year is double what the predicted income from the pot is as it stands at the moment

Pension providers do not predict income. You are misreading the projections. They are synthetic projections using artificial rates set by the regulator and intentionally lower than the likely outcome and use the lowest income rate method possible. They then reduce it further by deducting the equivalent of inflation (2.5% a year) to display the value in todays terms rather than future money terms.

nd the original 200k is safe in bricks and mortar.

a) you wont have £200k as you will have lost almost half in tax.
b) since when has bricks and mortar been safe?
c) after paying a horrendous amount of tax drawing the pension, you will then have to get used to paying a lot more tax on property. Increased stamp duty, taxation on rent, capital gains tax and potential inheritance tax. All to get a return that will be lower than the conventionally invested pension.

I'm afraid you have not thought this one through and are working on bad assumptions.

Paul_Herring

the income from the two houses per year is double what the predicted income from the pot is

Have you subtracted off/borne in mind

- voids
- tax (on the withdrawal of anything not within the 25% TCLS)
- tax (of all kinds, income and SDLT come easily to mind on the rental inome,)
- maintenance
- hassle of dealing with tenants between voids
- mortgages to cover the shortfall due to the tax in the second point, or differences in general

in your calculations?

shinytop

Hello.I am thinking of taking all the money out of my 200k pension pot and buying two houses to rent out, the income from the two houses per year is double what the predicted income from the pot is as it stands at the moment and the original 200k is safe in bricks and mortar.
What do you think

I think this may be a wind up

Terron

Property is working perfectly well for me.


I don't see it as tax inefficient.. I pay vasic rate income tax but no NI. on the properties I own in my own name. I also own some through a company and don't intent to pay much tax on the income from them. I pan to pay most of the profits into my pension.


I have made over 7% net each year from rents, 8% last year. This money is the income I live off, so the extra stability of property is important. Capital growth is less important to me, but I have seeen it.


I don't have any hasstle dealing with ttenants. I use letting agents for that (costs included in the net figures above).


Mortgages improve my yields, though my leverage is low (less than 50%)..


However


Two properties is too few to depend on for your entiew income. A problem with one would cut your income in half/ I have three not providing income currently bit that is only a third of my total and the worse period I have had in 5 years, (One is for sale, one has just bee refurbished after the tenants left, and the third is being refurbshed after I had to evict for non-payment.). I think you would need at least three properties, or a separate source of income.



The money I used to buy properties is separate from my pensions. I have two smallish pensions with 10.6% GARs, which only my best properties beat. My main SIPP increased by less than my properties paid on average, and the properties got more capital growth in addition. Some of that is down to luck., though I have been cautious. There are higher risk, higher retuirn ways of investing in property, but they would be even ;ess suitable as an alternative to a pension./

MEM62

Terron wrote: »

Property is working perfectly well for me.

I am sure they do, as I assume from your post that you are not only an experienced landlord but also one with a reasonable portfolio. In addition, you state that these are not your only retirement provision as you have mainstream pension products.

That puts you in a completely different situation to the one that the OP is suggesting he would put himself into.