On retirement can I invest my DC pension fund in a house to let ?

NeverOutOfWork

Many thanks to all, I have read your advice carefully and I shall shelve that one !     

I just need to find some method of investing the capital without losing a bundle to the taxman and have it generate an annual increase which is sufficient that I don't sit here regretting the decision that I make.

Thanks to all !

tr7phil

NeverOutOfWork said:

Many thanks to all, I have read your advice carefully and I shall shelve that one !     

I just need to find some method of investing the capital without losing a bundle to the taxman and have it generate an annual increase which is sufficient that I don't sit here regretting the decision that I make.

Thanks to all !

Leave it invested in the pension?

Albermarle

NeverOutOfWork said:

Many thanks to all, I have read your advice carefully and I shall shelve that one !     

I just need to find some method of investing the capital without losing a bundle to the taxman and have it generate an annual increase which is sufficient that I don't sit here regretting the decision that I make.

Thanks to all !

Then just leave it invested in the pension where it is entirely protected from tax.

Mr.Generous

I suppose you could look at like this if you want to invest in a rental property from pension pot....

Would you prefer to pay the tax man 25% tax or a bank 6% interest?

Take the max tax free lump sum and use it as a deposit, don't pay a load of tax to get into the rental game.

MEM62

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

NeverOutOfWork

Albermarle said:

NeverOutOfWork said:

Many thanks to all, I have read your advice carefully and I shall shelve that one !     

I just need to find some method of investing the capital without losing a bundle to the taxman and have it generate an annual increase which is sufficient that I don't sit here regretting the decision that I make.

Thanks to all !

Then just leave it invested in the pension where it is entirely protected from tax.

Thank you Albermarle, I reckon I shall do that, maybe set it up as Drawdown and take what I need when and if I need it.

Albermarle

NeverOutOfWork said:

Albermarle said:

NeverOutOfWork said:

Many thanks to all, I have read your advice carefully and I shall shelve that one !     

I just need to find some method of investing the capital without losing a bundle to the taxman and have it generate an annual increase which is sufficient that I don't sit here regretting the decision that I make.

Thanks to all !

Then just leave it invested in the pension where it is entirely protected from tax.

Thank you Albermarle, I reckon I shall do that, maybe set it up as Drawdown and take what I need when and if I need it.

Drawdown is normally best suited to regular payments, as that is how the providers admin is set up.
If you want to take irregular payments you can look at UFPLS, where each payment is exactly 25% tax free and 75% taxable. ( but may or may not be taxed depending on your overall tax situation)
Another alternative is to take the tax free cash only in tranches, leaving the taxable income until later.
It depends on your personal situation, and also what the provider offers in terms of different withdrawal methods.

leosayer

MEM62 said:

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

I agree with that and would add that you can get access to the property market in a pension via property funds which invest in commercial property like offices, shopping centres, warehouses etc. 

This has a lot of benefits over buy to let as someone else does all the work and there's less concentration risk as funds hold multiple properties. 

However given the relative risk and return of property funds, many might choose a more diversified portfolio to include shares and bonds.

SVaz

You could take only tax free cash for say, 10 years. Crystallising 10% (£16k) a year will give you £4000 tax free,  the other £12k remains invested.
You just need to make sure there is enough cash to do it, maybe have 3.3 years worth of cash each time you sell funds, or you could hold income funds that will give you the 2.5% dividends you need to generate the cash. 

I’ll be doing similar with a Sipp at 67. 

Albermarle

leosayer said:

MEM62 said:

NeverOutOfWork said:

I also have £160k in a DC pension fund and wonder if I am allowed to buy a house with it (if I add some cash which I can) there are a fair few available in my area, no mortgage required.  That would rent out and produce a good additional income.

Whether allowed or not, in my opinion, it would be far from a good idea.  It is not a passive income - you would be running a business with all the risks that entails.  Many small time landlords are leaving the market because of the  onerous legislation attached to renting out a property.  Do your research and and you will soon discover that you really do not want to be a landlord.       

I agree with that and would add that you can get access to the property market in a pension via property funds which invest in commercial property like offices, shopping centres, warehouses etc. 

This has a lot of benefits over buy to let as someone else does all the work and there's less concentration risk as funds hold multiple properties. 

However given the relative risk and return of property funds, many might choose a more diversified portfolio to include shares and bonds.

I have a commercial property fund and it nosedived during Covid - 70% at one point . Followed by a good recovery up until the start of 2022 and then 60% drop during that year, with some mild recovery in 2023. So as you say best to keep property a low % of your portfolio !