This Year's Most Stupid Idea So far?

mumf

The nature of my employment meant I could only contribute modestly to a private pension plan.My income being very mediocre.However, I bought and paid for my home in record time.Aside from maintenance,which is always ongoing and budgeted for,I no longer have housing costs.It also means I can work at any job I fancy,as I ain't gonna lose my home.

Property is straightforward.No smoke and mirrors like the pension industry.

C_Mababejive

Why is it such a big imperative that the housing bubble keeps getting pumped up? We have bent schemes such as help to buy, special ISA's, signing your poor parents up to your mortgage etc etc
all manner of things. If the system is unsustainable,which it is,then it must be allowed to naturally correct itself.

jimi_man

Yellow_mango wrote: »

Hmm. Whilst obviously it is important to have enough income to live off in retirement, having a paid off house to live in represents significant savings on rental costs. With built in inflation protection (ie you’ll be saving rental at whatever level it might be in the future).

So arguably it’s not a totally stupid idea to get on the property ladder and pay off the mortgage as soon as possible and then put the saved mortgage payments into a pension.

Why do you want to pay it off as soon as possible? Why not take advantage of the low interest rates, and put more into a pension?

Personally I think it's a daft idea they've come up with, simply because the average person won't bother to make up the shortfall.

Also there is still this idea that property is the nirvana of investments - I think someone said above that pensions are 'smoke and mirrors' - which just proves the point. Pensions pots are just investments in a tax wrapper as far as I can work out. There is no mystery to them, you invest money and ideally get some sort of return, and then when you have finished investing you live off the proceeds. It's hard to see how that is smoke and mirrors. It took me five minutes to set up a SIPP online and a further couple of minutes to set up a direct debit.

Property however, is much less straightforward. It's extremely tax inefficient and highly illiquid as an investment. If it's just your home then it's not so bad.

Personally I subscribe to the view that a compromise is best and do both? Pay off the mortgage normally and pay into a pension normally.

Paul_Herring

If it's just your home then it's not so bad.

And if it's just your home, then it's not technically an investment for your retirement. It's not as if, in retirement, you can withdraw on it "one sandwich at a time," as ISTR it being put once - you either have it to live in or you don't.

GunJack

jimi_man wrote: »

Why do you want to pay it off as soon as possible? Why not take advantage of the low interest rates, and put more into a pension? Because you can't live in a pension, and the sooner your house is paid-for, unless there are very very extreme circumstances, you ain't going to end up on the streets or scrimping for rent as you get older

Personally I think it's a daft idea they've come up with, simply because the average person won't bother to make up the shortfall.


Property however, is much less straightforward. It's extremely tax inefficient and highly illiquid as an investment. If it's just your home then it's not so bad. Property is VERY straightforward, and I think you'll find the VAST majority of people only look on their house as their home, not an investment vehicle

Personally I subscribe to the view that a compromise is best and do both? Pay off the mortgage normally and pay into a pension normally. Yes, but the security factor of mortgage-free housing is always undervalued on this forum, so if anything a slight bias towards mtg I feel would be prudent

IIf it was an either/or choice, I'd go with mortgage-free over pension BUT it isn't ether/or, it's a combination of both...it's getting your own personal balance between the two

ProDave

I posted my situation in another post. We own 2 houses outright. One is our previous house, now tenanted, the other is a new self build, not finished but habitable.

I need to raise some money to complete the new build. The old one should have sold by now but the sale has been delayed twice.

If there was a way I could borrow £20K to finish the new house, knowing in 4 years time the PCLS of my main pension would pay off that loan and still leave me exactly the same monthly income from the pension I would do it. Losing the PCLS to pay off the mortgage would not be a problem as that would be made up again when the old house eventually sells.

But I bet this scheme won't do something sensible like that. I would not do anything that would !!!!!! up a decent defined benefits pension.

Actually, what I would LIKE is the pension regulators to force ALL pension schemes to be more flexible.

My money is tied up in a scheme that has a fixed retirement date of age 60. I have 4 years to wait for that. The law allows you to draw a pension from age 55 but you can't do that if your pension provider won't offer that.

If all providers were forced to offer early payment (with an actuarial reduction because it will be paid for longer) then I could get the PCLS now and it would solve all my problems.

molerat

In a way my house is part of my pension. I would need an extra £12000 pa income before tax to rent it.

MEM62

ProDave wrote: »

Actually, what I would LIKE is the pension regulators to force ALL pension schemes to be more flexible.

Then they would not be pensions but just another savings account so, based on your argument, why not just scrap them altogether? The point of a pension is to provide for you in retirement. That is a pensions' specific purpose. It should also be noted that many of those restrictions are in place to prevent people blowing their pension pots and therefore facing poverty in retirement.

JillyC8

Agree - the same rules for accessing DC pensions should be in plac for all. Or none.

Mnd

I still think the stupidist idea this year was the Japanese lady who thought it was a wiz to climb a mountainin a bikini