Is State Pension Alone Enough To Live On?

bostonerimus

zagfles said:

bostonerimus said:

Like most topics today there's a lot of hyperbolae talked about BTL. I'm sure there are cases of abuse by both landlords and tenants at the extremes, but for my part being a landlord has been a long term project that has benefited my finances and I hope it has benefited my tenants too. 

It needs to be emphasized that BTL is not easy. You are starting a small business and you need to analyze the numbers carefully and integrate it into you larger financial plan. You also need to provide good quality and safe accommodation and be prepared to maintain the property. BTL does not replace a pension or an ISA (which should come first), but it is a nice compliment if you can make it work. My approach was to buy a two family home with a flat on the ground floor and a larger flat above where I live. I used the rental income to make extra mortgage payments and so paid off the whole house in 14 years. I did deduct mortgage interest when I was paying it and obviously still deduct expenses and depreciation, although not depreciation for much longer. I keep my rental below the market rate because I can afford to and I don't want to contribute to rental inflation.

I've ended up with a nice house and regular income and significant capital appreciation. It was a risk to take on a larger mortgage at the beginning, but I don't think that it was any larger risk than I took investing in the stock market and added some diversity to my finances, and I'm very grateful for that now that I'm retired and mortgage free on essentially two properties.

Isn't your rental in the USA? Which probably has completely different taxation and rental laws?

Yes it is in the US and the tax will be different. In the US everyone gets to deduct mortgage interest from their taxes and the BTL landlord gets to deduct the interest they pay on any rental mortgage as a business expense along with other expenses associated with the rental. This is why I always say "look at the numbers" and use a BTL if the numbers work out and as a long term investment and compliment to the usual tax advantaged investments. 

adonis10

I wouldn’t bank on it. Given your age, it is fairly certain that there won’t be a state pension when you retire. I’m 38 and don’t factor it into retirement income as it’ll either be abolished/eroded so much by inflation it’ll be worthless.

bostonerimus

adonis10 said:

I wouldn’t bank on it. Given your age, it is fairly certain that there won’t be a state pension when you retire. I’m 38 and don’t factor it into retirement income as it’ll either be abolished/eroded so much by inflation it’ll be worthless.

IMO if SP disappears it will be a bigger "default" than not paying government debt. If it happens there will be more to worry about than not getting a cheque.

nigelbb

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

Kim1965 said:

sevenhills said:

Kim1965 said:

So if a person reaches spa and only has the new state pension as income. If they are paying the £800 as a mortgage payment are they still able to get state help?? 

Why would someone that is able to buy their own house and likely have £100k+ in equity need more state help?

People bash the state pension, but people have known for decades that the state pension is not a millionaires income, so they need to save.

I agree. What i cant get my head around is that the monthly rent is of ten as much as a mortgage. I  cannot understand how our housing/house building strategy cannot come up with a more accessible home buying. If a family can rent for 25 yrs surely they can buy. 

Buy to let landlords have priced out first time buyers because they were given tax advantages not available to non-landlords & the criteria for lenders are too strict. My stepson mid-20s on pays about £500/month to rent a flat but a mortgage to buy the flat would be about £400/month except he cannot get a mortgage because the lenders want too high a deposit.

What tax advantages? BTL'ers pay higher stamp duty when they buy, CGT when they sell, and unlike virtually all businesses can't even fully offset genuine expenses like mortgage interest against rental income. Owners get the tax advantages.

That partly why buying is cheaper than renting, I don't know why that surprises anyone but it seems to. Plus obviously rent includes stuff that a buyer has to pay for eg property maintenance, insurance etc. Something often forgotten about when comparing the two, I've probably spent about £2-3k pa on average on property maintenance.

Until 2020 BTL landlords could offset mortgage interest in full against other income eg salary & receive relief at their marginal tax rate unlike private purchasers. Now they only get tax relief at 20% the poor things. If they were running a proper business through a limited company they could still offset all expenses against income including mortgage interest.

They could offset mortgage interest against rent, that's the basics of any business, you pay tax on profit not revenue. Mortgage interest is obviously business expense, just like a shopkeeper selling tins of beans only has to pay tax on profit, sales minus costs including overheads, not on the full retail price he sells the beans at. But now BTL'ers can't even fully offset mortgage interest. That plus CGT which you can't stage by selling in bits and using allowances like you can with shares, don't have the tax advantages of ISA/pensions, high stamp duty etc...

Are you a BTL landlord by any chance?

No. Never have been, never will be. Not only is it tax inefficient compared to pensions, a geared investment on a single property (or even a few) is massively risky and far too much hassle.

The reason that renting is more expensive than buying is partly because BTL landlords have forced up low end house prices but also because the renter is not only paying the BTL landlord's mortgage but also a premium on top for profit.

There's also maintenance costs, and all the nanny state regulations landlords have to comply with over and above what an owner occupier would have to do. Plus needing to budget for rental voids, or a non-paying tenant who could take 6 months to evict and may (as often happens in these situations) trash the place with no hope of the landlord recovering anything.

That's why rental costs are so high. So called "tenants rights" basically mean good tenants pay for bad ones.

The reason that BTL landlords can now only offset mortgage interest at standard rate of income tax is because the borrowing of money through a BTL mortgage was such a major tax advantage to the BTL landlord that the prices of lower end property was inflated to the detriment of owner occupiers & the taxpayer was giving BTL landlords hand outs to allow them to distort the property market. The disadvantage to house buyers & other taxpayers was so extreme that even the Tory government recognised the unfairness involved so acted to level the playing field.

It's not a "major tax advantage", it's how any business works. You get taxed on profits, and you can offset expenses against that profit. The govt decided to "distort" the property market by doing the above, plus higher stamp duty etc, which when added to stuff like CGT swings the tax advantage firmly to the owner occupier.

The real problem wasn't BTL'ers distorting the market, it's stuff like people buying second homes, dodgy foreign money buying top-end property which inflates their price and ripples down, people buying houses bigger than they need because "it's a good investment". People "wasting" property - properties that are rented out aren't "wasted".

You write as though the plucky BTL landlords were making a sacrifice by offering rental properties instead of taking advantage of a one way bet at the expense of tenants & taxpayers.

That's the illusion that some people have about the property market, that it's a one way bet. No it isn't. I know people who've been badly burned. A friend's son, bought a flat to live in, good job, quite happy. Then started to have mental health problems. Couldn't cope on his own, had to go back to live with his parents. Always intended to return to his flat, but didn't get better. Then he got made redundant. Couldn't find another job, had no income, couldn't face living alone yet, but didn't want to give up on independance so didn't want to sell the flat, so his only option was to rent it. Had nightmare tenants which made his mental health far worse. Eventually sold it for a big loss.

I didn't say buying property was a one way bet. I said BTL was a one way bet because of all the tax advantages.

You keep banging on about these "tax advantages". Do you understand capital gains tax and stamp duty? Do you understand that they are levied differently? Who pays more stamp duty, a BTL'er or a first time buyer? Who pays CGT, a BTL'er or an owner occupier? Do you understand how it's normal practice to be taxed on profits rather than revenue? Maybe I'll tell my friend's son with MH problems that he lost a "one way" bet. Or if you want to pull pedantry (he didn't actually buy to let, he let a flat he already owned), maybe you'd suggest he uses his remaining money to buy a BTL, he can't go wrong, can he?

I didn't say that property or BTL IS a one way bet. I said that BTL WAS a one way bet. That's why for nearly 30 years the BTL market boomed. There has been a correction& BTL is no longer the one way bet that it was & quite right too.

marycanary

There's also maintenance costs, and all the nanny state regulations landlords have to comply with over and above what an owner occupier would have to do. Plus needing to budget for rental voids, or a non-paying tenant who could take 6 months to evict and may (as often happens in these situations) trash the place with no hope of the landlord recovering anything.

That's why rental costs are so high. So called "tenants rights" basically mean good tenants pay for bad ones.

What "nanny state regulations"? Do you mean not expecting people to pay for unsafe homes which will make them ill or put them in hospital A&E?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/9425/150940.pdf

Or having to protect the tenant's deposit or give 2 months' notice of having to move?

All quite oppressive on the landlord and their ability to make a profit

lisyloo

marycanary said:

There's also maintenance costs, and all the nanny state regulations landlords have to comply with over and above what an owner occupier would have to do. Plus needing to budget for rental voids, or a non-paying tenant who could take 6 months to evict and may (as often happens in these situations) trash the place with no hope of the landlord recovering anything.

That's why rental costs are so high. So called "tenants rights" basically mean good tenants pay for bad ones.

What "nanny state regulations"? Do you mean not expecting people to pay for unsafe homes which will make them ill or put them in hospital A&E?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/9425/150940.pdf

Or having to protect the tenant's deposit or give 2 months' notice of having to move?

All quite oppressive on the landlord and their ability to make a profit

There’s a difference I think between not killing people with carbon monoxide (quite a reasonable request) and expecting landlords to vet people for illegal immigration, money laundering etc.
I can see the need for the latter but the red tape burden has definitely increased.
whether the checks are perfect or effective is another matter but clearly we need some at various points where checks can take place.

zagfles

nigelbb said:

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

zagfles said:

nigelbb said:

Kim1965 said:

sevenhills said:

Kim1965 said:

So if a person reaches spa and only has the new state pension as income. If they are paying the £800 as a mortgage payment are they still able to get state help?? 

Why would someone that is able to buy their own house and likely have £100k+ in equity need more state help?

People bash the state pension, but people have known for decades that the state pension is not a millionaires income, so they need to save.

I agree. What i cant get my head around is that the monthly rent is of ten as much as a mortgage. I  cannot understand how our housing/house building strategy cannot come up with a more accessible home buying. If a family can rent for 25 yrs surely they can buy. 

Buy to let landlords have priced out first time buyers because they were given tax advantages not available to non-landlords & the criteria for lenders are too strict. My stepson mid-20s on pays about £500/month to rent a flat but a mortgage to buy the flat would be about £400/month except he cannot get a mortgage because the lenders want too high a deposit.

What tax advantages? BTL'ers pay higher stamp duty when they buy, CGT when they sell, and unlike virtually all businesses can't even fully offset genuine expenses like mortgage interest against rental income. Owners get the tax advantages.

That partly why buying is cheaper than renting, I don't know why that surprises anyone but it seems to. Plus obviously rent includes stuff that a buyer has to pay for eg property maintenance, insurance etc. Something often forgotten about when comparing the two, I've probably spent about £2-3k pa on average on property maintenance.

Until 2020 BTL landlords could offset mortgage interest in full against other income eg salary & receive relief at their marginal tax rate unlike private purchasers. Now they only get tax relief at 20% the poor things. If they were running a proper business through a limited company they could still offset all expenses against income including mortgage interest.

They could offset mortgage interest against rent, that's the basics of any business, you pay tax on profit not revenue. Mortgage interest is obviously business expense, just like a shopkeeper selling tins of beans only has to pay tax on profit, sales minus costs including overheads, not on the full retail price he sells the beans at. But now BTL'ers can't even fully offset mortgage interest. That plus CGT which you can't stage by selling in bits and using allowances like you can with shares, don't have the tax advantages of ISA/pensions, high stamp duty etc...

Are you a BTL landlord by any chance?

No. Never have been, never will be. Not only is it tax inefficient compared to pensions, a geared investment on a single property (or even a few) is massively risky and far too much hassle.

The reason that renting is more expensive than buying is partly because BTL landlords have forced up low end house prices but also because the renter is not only paying the BTL landlord's mortgage but also a premium on top for profit.

There's also maintenance costs, and all the nanny state regulations landlords have to comply with over and above what an owner occupier would have to do. Plus needing to budget for rental voids, or a non-paying tenant who could take 6 months to evict and may (as often happens in these situations) trash the place with no hope of the landlord recovering anything.

That's why rental costs are so high. So called "tenants rights" basically mean good tenants pay for bad ones.

The reason that BTL landlords can now only offset mortgage interest at standard rate of income tax is because the borrowing of money through a BTL mortgage was such a major tax advantage to the BTL landlord that the prices of lower end property was inflated to the detriment of owner occupiers & the taxpayer was giving BTL landlords hand outs to allow them to distort the property market. The disadvantage to house buyers & other taxpayers was so extreme that even the Tory government recognised the unfairness involved so acted to level the playing field.

It's not a "major tax advantage", it's how any business works. You get taxed on profits, and you can offset expenses against that profit. The govt decided to "distort" the property market by doing the above, plus higher stamp duty etc, which when added to stuff like CGT swings the tax advantage firmly to the owner occupier.

The real problem wasn't BTL'ers distorting the market, it's stuff like people buying second homes, dodgy foreign money buying top-end property which inflates their price and ripples down, people buying houses bigger than they need because "it's a good investment". People "wasting" property - properties that are rented out aren't "wasted".

You write as though the plucky BTL landlords were making a sacrifice by offering rental properties instead of taking advantage of a one way bet at the expense of tenants & taxpayers.

That's the illusion that some people have about the property market, that it's a one way bet. No it isn't. I know people who've been badly burned. A friend's son, bought a flat to live in, good job, quite happy. Then started to have mental health problems. Couldn't cope on his own, had to go back to live with his parents. Always intended to return to his flat, but didn't get better. Then he got made redundant. Couldn't find another job, had no income, couldn't face living alone yet, but didn't want to give up on independance so didn't want to sell the flat, so his only option was to rent it. Had nightmare tenants which made his mental health far worse. Eventually sold it for a big loss.

I didn't say buying property was a one way bet. I said BTL was a one way bet because of all the tax advantages.

You keep banging on about these "tax advantages". Do you understand capital gains tax and stamp duty? Do you understand that they are levied differently? Who pays more stamp duty, a BTL'er or a first time buyer? Who pays CGT, a BTL'er or an owner occupier? Do you understand how it's normal practice to be taxed on profits rather than revenue? Maybe I'll tell my friend's son with MH problems that he lost a "one way" bet. Or if you want to pull pedantry (he didn't actually buy to let, he let a flat he already owned), maybe you'd suggest he uses his remaining money to buy a BTL, he can't go wrong, can he?

I didn't say that property or BTL IS a one way bet. I said that BTL WAS a one way bet. That's why for nearly 30 years the BTL market boomed. There has been a correction& BTL is no longer the one way bet that it was & quite right too.

Oh with hindsight you mean But even that's rubbish - try telling that to someone who bought a BTL in Northern Ireland at the height of the Irish property boom in 2007 and then saw it halve in value over the next 5 years.

Tell me - as businesses can still get full tax relief on interest, why do you think big business hasn't moved into the residential letting market, except in a few niche areas? Big business is usually all over anything that's a sure fire profitable business. Surely they wanted a cut of this "one way bet"?

Why do you think the primary business model of the big house builders is to buy land, build houses/flats, then sell them? Rather than buy land, build houses/flats, and rent them? They even market property to BTL'ers as well as owner occupiers eg see https://www.barratthomes.co.uk/the-buying-process/investors-guide/ Why are (and were) they giving that "one way bet" to someone else do you think?

This delusion that property investment of any kind, whether a BTL, owner occupied, second homes, timeshares etc is a "one way bet" is self fullfilling for a while, just like any bubble, but just like any bubble, it eventually bursts and people discover it wasn't really a "one way bet" after all.

People just don't learn from history, even recent history. Remember the global financial crisis in 2007? That was caused by people thinking property investment is a "one way bet" and selling collateralised mortgage obligations as very low risk investments, because they're backed by property, and property is a "one way bet", right?

adindas

Conan1Sett said:

So I am talking about pure survival here...

I've worked out that state pension would be £179 per month approximately. 

"Pure Survival". People could certainly survive with state pension. I say that with degree of confidence of 100%. Yes, life is not comfortable, but the question is about pure survival isn't it ??

A lot of people around the world are living much less than that and do not have state pension and benefit like we get here in the UK, yet they still survive. Here in the UK and Europe in general, health care is free for those who can not effort for it. Not to mention you could always claim the dole.

zagfles

marycanary said:

There's also maintenance costs, and all the nanny state regulations landlords have to comply with over and above what an owner occupier would have to do. Plus needing to budget for rental voids, or a non-paying tenant who could take 6 months to evict and may (as often happens in these situations) trash the place with no hope of the landlord recovering anything.

That's why rental costs are so high. So called "tenants rights" basically mean good tenants pay for bad ones.

What "nanny state regulations"? Do you mean not expecting people to pay for unsafe homes which will make them ill or put them in hospital A&E?

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/9425/150940.pdf

Or having to protect the tenant's deposit or give 2 months' notice of having to move?

All quite oppressive on the landlord and their ability to make a profit

No, but nice strawman. Mainly stuff like having to go through a long winded costly eviction process that takes maybe 6 months if the tenant doesn't pay their rent, or breaks the tenancy agreement like getting a pet etc. And stuff like as mentioned above, having to change light bulbs for them! Main reason I'll never be a landlord, and why big business generally isn't interested. Imagine if Tesco couldn't do anything if someone walks out of their store without paying for their shopping! That's basically what landlords have to put up with for 6 months if a tenant doesn't pay their rent.

This adds costs for tenants as landlords need to budget for the possibility in the rent and insurance, so good tenants end up paying for bad ones.

marycanary

Speaking of strawmen, where in anything I posted does it say landlords have to change a light bulb? If a particular council do that it's because they are a super good, caring landlord. It is certainly is not standard. practice, much less a legal requirement in single occupied homes. 

It should take time to evict someone from their home. Delays in doing this are not due to the "nanny state" they are created by an inefficient, underfunded court system. We are often urged to feel sorry for landlords who don't get their rent but we seldom hear about tenants evicted for complaining about unsafe conditions.