BTL is a no go now... where to next

Domster

Hi

first post here.
I am looking for some idea on investment.

For the past 20 years I have been putting money in work pension funds and BTLs.
And I would be probably still be doing the same was it not for the change in private landlord taxation.

I have looked at purchasing additional pension from my current provider and I have been quoted £4500 for every additional £250 per year... is that a good return?

What else would you suggest taking in account that I am hoping to retire between 5 and 10 years from now?

Thanking you all in advance

SonOf

I have looked at purchasing additional pension from my current provider and I have been quoted £4500 for every additional £250 per year... is that a good return?

Not possible to answer without knowing your age, selected retirement age, health and marital status.
It is effectively a calculation of life expectancy for you and your spouse vs payment period.

It's not investment backed and is secure. Financially, pound for pound, they are usually good value if your health is good and you plan to retire at scheme retirement age. If you are looking to go earlier than scheme retirement age, then it depends on the scheme and your other funds as to what and how you can phase payments as to whether these would be suitable.

Domster

Not possible to answer without knowing your age, selected retirement age, health and marital status.
It is effectively a calculation of life expectancy for you and your spouse vs payment period.

51, Married, good health... was hoping to retire at 56, but realistically will probably be 60, that is the age I used for the quotation

SonOf

Domster wrote: »

51, Married, good health... was hoping to retire at 56, but realistically will probably be 60, that is the age I used for the quotation

When is the scheme retirement age?
Is there a penalty for taking the benefits before scheme retirement age?
Is the additional payment scheme linked to the main scheme? (i.e. do you have to take both together).

MisterMotivated

Domster wrote: »

I have looked at purchasing additional pension from my current provider and I have been quoted £4500 for every additional £250 per year... is that a good return?

Personally, I'm not a huge fan of annuities. With the above quote, it'll take you 18 years of retirement just to get your money back, whereas if you kept the money and were disciplined enough to use £250 per year (or however many multiples), the money would hopefully be earning you some kind of return, even if just a relatively modest interest amount. A quick and dirty spreadsheet projection shows that if you could earn 2% growth on the capital, the money would last about 22 years, at 4% it would last 30 years.

However, I'm not a paradigm of healthy living, so wouldn't expect to live past 90 (nor would I really want to, tbh); you might be totally different, so I guess it would also depend on how much you plan to put into the scheme and how long you hope to live. An extra £250 per year for example wouldn't make a major difference to most people's lifestyle, but if you were going to invest say £90,000, that would be £5k per year that would keep going after your original capital had run out

SonOf

Personally, I'm not a huge fan of annuities.

Its not an annuity.

Its a taxpayer subsidised guaranteed income option.

it'll take you 18 years of retirement just to get your money back,

Its less than that as the income is indexed.

Domster

When is the scheme retirement age?
Is there a penalty for taking the benefits before scheme retirement age?
Is the additional payment scheme linked to the main scheme? (i.e. do you have to take both together).

The scheme allows you to elect your retirement age , I choose 60 for the quote.
Yes, if I elect to retire before the date stated in the quote I would receive a part of the additional pension entitlement.
Yes, it is linked.
Suppose I should mention as well that in the quote I elected to have my spouse added as beneficiary of the additional pension

sal_III

If you already have BTL portfolio and you main concern is personal tax for LLs, have you explored the option of SPV limited company to hold your portfolio?

Domster

have you explored the option of SPV limited company to hold your portfolio?

I cannot say I have.
Would the properties have to be sold to the SPV company (that would attract capital gain)?
Have you got a dummy guide to SPV incorporation you could share?

sal_III

I don't have a dummy guide to recommend, you can google one as easily as me.

The properties will have to be sold to the company with potentially capital gains tax and you will have to pay SDLT on them. But since you will be essentially lending the personal funds as capital to the limited company for the purchase the value will go against the director loan account on the company books. So for the foreseeable future when you are extracting profits from the company it will be free from personal tax until the account is cleared. Then going forward you have the advantage of much lower tax.