The Great Pensions Crisis - Channel 5

Malthusian

kev2009 wrote: »

I never saw this program, didn't know it was on. Out of interest, would you assume to half the £27k if single or not really?

Not really. A couple have lower costs than the same two people living individually. This is why Pension Credit for a couple is lower than 2x individuals.

Assume nothing. Add up your own expenditure, cross out expenses you won't have in retirement and see what it comes to.

MoneyWorry wrote:

What was most interesting about the programme was that they had bought into the idea of the recent retirement living standards by the PLSA.

£15,700 minimum
£29,100 moderate
£47, 500 comfortable

This defines a "moderate" retirement living standard as considerably above the median living standard in this country. The median income is around £27k and the retirement living standard of someone on the median income would be closer to £20k after accounting for lower costs in retirement.

Their conception of a "comfortable" retirement living standard is totally meaningless.

After accounting for reduced expenditure needs in retirement and the tax required to generate a £47,500pa income, they're essentially saying that only people with annual income in six figures or very close to it should expect a "comfortable" retirement.

Ceme3000

kev2009 wrote: »

I never saw this program, didn't know it was on. Out of interest, would you assume to half the £27k if single or not really?

Thanks

Kev

You might be interested in looking at the minimum income standard calculator from the Joseph Rowntree Foundation. It seems to think a single pensioner needs a minimum of £9397. The assumptions and breakdown of how this figure is arrived at is on the site.

https://www.minimumincome.org.uk/

Spreadsheetman

Sea_Shell wrote: »

I think security of tenancy is the main factor stopping owners changing to renters in old age.

What sort of tenancy agreement is your elderly tenant on? What would happen to them if your circumstances changed and the property was no longer available to rent?

That is entirely the problem. Secure tenure plus a RPI-linked maximum rent increase would make renting a lot more attractive for the elderly. I'd not consider it otherwise if I had a choice.

Linton

Malthusian wrote: »

Not really. A couple have lower costs than the same two people living individually. This is why Pension Credit for a couple is lower than 2x individuals.

Assume nothing. Add up your own expenditure, cross out expenses you won't have in retirement and see what it comes to.



This defines a "moderate" retirement living standard as considerably above the median living standard in this country. The median income is around £27k and the retirement living standard of someone on the median income would be closer to £20k after accounting for lower costs in retirement.

Their conception of a "comfortable" retirement living standard is totally meaningless.

After accounting for reduced expenditure needs in retirement and the tax required to generate a £47,500pa income, they're essentially saying that only people with annual income in six figures or very close to it should expect a "comfortable" retirement.

The figures on living standard you give are for a couple. This is shown in the original posting but seems to have been lost in your quote.

nigelbb

Anonymous101 wrote: »

I would actually argue the opposite. I think the actual difference between renting and purchasing once you factor in costs of lending and particularly maintenance is minimal. There's lots of research in the States about this and in many cases its found to be cheaper to rent.

That's a nonsense argument. How can paying someone else's mortgage ever be cheaper than paying your own? If you buy your own house after 25 years you stop paying rent & have a realisable asset.

Even if the argument held water & the costs were equivalent in the UK the overwhelming reason to prefer buying over renting is security of tenure. Who would prefer to be living in a house from one year to the next always at the whim of the landlord who can evict you for no reason at all.

Anonymous101

nigelbb wrote: »

That's a nonsense argument. How can paying someone else's mortgage ever be cheaper than paying your own? If you buy your own house after 25 years you stop paying rent & have a realisable asset.

Even if the argument held water & the costs were equivalent in the UK the overwhelming reason to prefer buying over renting is security of tenure. Who would prefer to be living in a house from one year to the next always at the whim of the landlord who can evict you for no reason at all.

Its not a nonsense argument at all. Its a worthwhile discussion that you don't often see people having. I'm not saying definitively that one is better than the other. I'm saying that there is much more to think about than purely the cost of the rent vs the cost of the mortgage. Purchase costs, ground rent, insurance etc etc
Maintenance costs alone will run into thousands per year if you consider the lifespan of a building and split out every cost required back into an annual cost. People in the UK don't often think about it like this. We're obsessed with ownership and I think that this could sometimes blind us to the true picture.


I absolutely take the point on security of tenure. That is certainly an issue. I think that there is certain ways this can be overcome - local authority housing being one. But I'm not aware of a private rental situation which overcomes this.

nigelbb

Anonymous101 wrote: »

Its not a nonsense argument at all. Its a worthwhile discussion that you don't often see people having. I'm not saying definitively that one is better than the other. I'm saying that there is much more to think about than purely the cost of the rent vs the cost of the mortgage. Purchase costs, ground rent, insurance etc etc
Maintenance costs alone will run into thousands per year if you consider the lifespan of a building and split out every cost required back into an annual cost. People in the UK don't often think about it like this. We're obsessed with ownership and I think that this could sometimes blind us to the true picture.


I absolutely take the point on security of tenure. That is certainly an issue. I think that there is certain ways this can be overcome - local authority housing being one. But I'm not aware of a private rental situation which overcomes this.

Do you own a house? I have owned several over the last 40 years. I have never found that maintenance costs run into thousands per year.

Renting a house in the private sector costs more than paying the mortgage required to purchase that house. How else do you think all these BTL landlords make money? After 25 years you stop paying the mortgage & own an asset. After 25 years of paying rent you can look forward to paying rent for another 25 years & never owning the house.

It is simply not possible in the current housing market in the UK for renting to be cheaper than buying especially over an individual's lifetime.

Brilley

Anonymous101 wrote: »

I would actually argue the opposite. I think the actual difference between renting and purchasing once you factor in costs of lending and particularly maintenance is minimal. There's lots of research in the States about this and in many cases its found to be cheaper to rent.

???? Sorry but I would have to disagree with this by a country mile and then some!!!

If I were to calculate our actual costs to buy our current property, and its current "equity" compared to renting, (...and continuing renting for ever), then I would imagine there would be £10s of thousands difference. Assuming an average rent cost covers a mortgage payment after "x" years you own the house and stop paying. With renting you are effectively paying a mortgage until end of days with no asset to show for it.

Assuming you have a "regular" property I would be surprised if maintenance costs came to more than £1k per year overall, (...if that).

Perhaps it is "relatively" cheaper to rent in the US as land is more plentiful / cheaper?

p00hsticks

nigelbb wrote: »

Renting a house in the private sector costs more than paying the mortgage required to purchase that house. How else do you think all these BTL landlords make money?

You are assuming that the majority of BTL landlords have just gone out and bought a fully mortgaged house and immediately rented it out. That simply isn't the case.

Private landlords who have paid cash, owned for a while and paid off most of the mortgage or inherited their properties can charge below mortgage -level rents and still make a profit.

And in rural locations (and elsewhere) you can still find places where many properties are rented out by the historic large landowners, with the tenants having lived there all their lives and having protected tenancies

AnotherJoe

Anonymous101 wrote: »

I would actually argue the opposite. I think the actual difference between renting and purchasing once you factor in costs of lending and particularly maintenance is minimal. There's lots of research in the States about this and in many cases its found to be cheaper to rent.

The States is a different beast, also Ive seen many analyses "proving" its better to be a LL and rent out properties you own to make profit, but both cant be true simultaneously. If you are making a profit from your tenants then obv they coudl do it cheaper by having a mortgage since thats what you as a LL are doing.

Second, all the analyses I've seen are either biased or flawed (depending on your POV) because they compare cost of a 30 year mortgage to cost of renting for 30 years. But that totally misses what happens when the mortgage is paid off. I haven't yet seen one when you rent for 60 years or own for 60 years paying a mortgage for only 30.
Plus, never mind the

Anonymous101 wrote: »

My opinion is that as we age the responsibility and cost of maintenance becomes unmanageable for many and that the majority of people would be better to take any equity prior to reaching that point out of their house and invest it, using the proceeds to pay for their rent.

The house next to me, which is a rental, its monthly rental cost is more than the cost of buying

with a mortgage. So how can it be cheaper to rent? Maintenance isnt that much. Or just move to a place where maintenance is included or use a maintenance company.

Plus never mind the responsibility and trouble of maintenance, what about the hassle of being forced to move at the whim of a LL, or not getting maintenance done because the LL is tardy or doenst agree with your priorities? Plenty of posts here from people in rental unabel top get boilers fixed or windows, whatever. If its your house, pay some money get it done at your timescale and no ones going to issue you a S21 because youve complained about there being no heating for 2 weeks.