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    • TotalNoob
    • By TotalNoob 8th May 18, 8:35 AM
    • 2Posts
    • 1Thanks
    TotalNoob
    What would you do?
    • #1
    • 8th May 18, 8:35 AM
    What would you do? 8th May 18 at 8:35 AM
    Hi,
    I'm 51, I don't have a pension running as I've haven't been able to afford it (although I do have an old pension pot of around 8k), I have had credit issues including an IVA in the past although credit file is now clear, and I don't own my own home.
    I have Aspergers which may or may not have something to do with this - opinions differ on that.
    I am now a director of my own company and based on the past 2 years I take home roughly 60k per year. My partner is a shareholder and employee, earning around 20k, and also has a civil service pension which she isn't drawing yet.
    Should I be thinking about buying a house, or starting a pension? I'm not sure I can affford both so what should my priority be? Should I look at buy-to-let instead? (I see that most of these lenders seem to expect you to own your own home first)
    I've never intended retiring, but I sometimes wonder if I might be forced into it my illness or circumstances.
    Any helpful input welcome.
Page 1
    • dmelife
    • By dmelife 8th May 18, 8:43 AM
    • 38 Posts
    • 49 Thanks
    dmelife
    • #2
    • 8th May 18, 8:43 AM
    • #2
    • 8th May 18, 8:43 AM
    House purchase would be sensible, paying rent in retirement is not ideal.

    Pay off expensive short term debt.
    Save for deposit.
    Get mortgage to age 67.
    Get relevant life cover through company to cover mortgage balance on death.
    Start pension/use existing pension.
    Use company to make pension
    contributions.
    Don!!!8217;t overpay mortgage but maximise pension contributions, it!!!8217;s more tax efficient.
    Don!!!8217;t do buy to let!
    • Dox
    • By Dox 8th May 18, 9:06 AM
    • 734 Posts
    • 502 Thanks
    Dox
    • #3
    • 8th May 18, 9:06 AM
    • #3
    • 8th May 18, 9:06 AM
    House purchase would be sensible, paying rent in retirement is not ideal.

    Pay off expensive short term debt.
    Save for deposit.
    Get mortgage to age 67.
    Get relevant life cover through company to cover mortgage balance on death.
    Start pension/use existing pension.
    Use company to make pension
    contributions.
    Don't overpay mortgage but maximise pension contributions, it's more tax efficient.
    Don't do buy to let!
    Originally posted by dmelife
    All that on 60K a year, presumably with no lump sum savings to use as a deposit? You do indeed need to prioritise based on what you can afford - and having somewhere to live in old age looks a pretty high priority to me.

    Not sure why you mention buy to let - how would you fund any such purchase if you can't (yet) afford to buy somewhere to live yourself?

    Pensions may be a tax efficient way to save but the reality is you can't afford to contribute if you are really going to focus on buying your own place.

    Having said all the above, ultimately it is your own decision - nobody can take it for you, although presumably it would be a good idea to consult your partner (any chance she could earn more to add to your joint income and thus speed up the property acquisition process, if that's what you decide is your priority?).
    • dmelife
    • By dmelife 8th May 18, 9:23 AM
    • 38 Posts
    • 49 Thanks
    dmelife
    • #4
    • 8th May 18, 9:23 AM
    • #4
    • 8th May 18, 9:23 AM
    That was an order of priority, not to do all at once! Although, if they can!!!8217;t sort out a mortgage and pension contributions on 80k a year then they!!!8217;re in trouble!
    • Dox
    • By Dox 8th May 18, 9:31 AM
    • 734 Posts
    • 502 Thanks
    Dox
    • #5
    • 8th May 18, 9:31 AM
    • #5
    • 8th May 18, 9:31 AM
    That was an order of priority, not to do all at once! Although, if they can!!!8217;t sort out a mortgage and pension contributions on 80k a year then they!!!8217;re in trouble!
    Originally posted by dmelife
    If someone is 51 with no deposit and looking (as you suggest) at a mortgage repayable by age 67, it probably isn't viable to consider pension contributions as well. Don't forget these will be taken into account when the mortgage lender looks at OP's outgoings to assess their ability to make mortgage repayments.
    • Brynsam
    • By Brynsam 8th May 18, 10:15 AM
    • 1,268 Posts
    • 869 Thanks
    Brynsam
    • #6
    • 8th May 18, 10:15 AM
    • #6
    • 8th May 18, 10:15 AM
    I am now a director of my own company and based on the past 2 years I take home roughly 60k per year. My partner is a shareholder and employee, earning around 20k, and also has a civil service pension which she isn't drawing yet.
    Should I be thinking about buying a house, or starting a pension? I'm not sure I can affford both so what should my priority be?
    Originally posted by TotalNoob
    Other people can't tell you what your priorities are - for many of us, the security of owning the place where we live is the most important thing. But if you have a secure tenancy in a place you like living, buying a new home may be a step too far depending on how rigid your thought processes are (that's not a criticism - you have volunteered that you have Aspergers and I'm simply taking that fact into account).

    Having said that, if you are open to living somewhere else, making that your focus could be a good idea. Ditto building up the business - not only will it fund your mortgage repayments but when you do decide to retire, or at least reduce your working hours, selling a thriving business could give you a healthy sum to invest/live on in later years.
    • TotalNoob
    • By TotalNoob 8th May 18, 2:13 PM
    • 2 Posts
    • 1 Thanks
    TotalNoob
    • #7
    • 8th May 18, 2:13 PM
    • #7
    • 8th May 18, 2:13 PM
    These are all amazing comments, so thanks very much for that.
    Our priority is indeed a secure home, but only if we can afford it.
    Our rental home is secure at the moment, but our landlord is significantly older than we are, suggesting that this might not be the case in future.
    We have both owned property in the past, so no chance of a "first-time" mortgage but we are well able to deal with what is involved, but thanks for understanding my situation and I'm genuinely grateful for the concern.
    I think I agree that buying a home is paramount, as is building up the business so it can give us both a more secure future. At least I'm not likely to be made redundant!
    Really grateful for the advice!
    • kidmugsy
    • By kidmugsy 8th May 18, 3:55 PM
    • 11,039 Posts
    • 7,586 Thanks
    kidmugsy
    • #8
    • 8th May 18, 3:55 PM
    • #8
    • 8th May 18, 3:55 PM
    I am now a director of my own company and based on the past 2 years I take home roughly 60k per year.
    Originally posted by TotalNoob
    60k is an odd number to draw from your company. People I know would aim to draw at the higher rate tax threshold, taking about 8,500 in salary (which gains you NIC credits without your needing to pay much in NICs) and the balance in dividends. If that leaves some surplus money in the company then either keep it there - in case you have a bad year - or instruct the company to contribute it to a pension for you. The latter is tax-efficient because the money pays neither income tax nor corporation tax.

    So this leaves the two of you saving hard for a deposit without having had to pay 40% income tax. Your own first 13,850 will be free of income tax and the balance will pay income tax at the dividend rate i.e. 7.5%. Similar comments apply to your partner. Unless you're spending on children or parents you should be able to save at a brisk pace as long as you live reasonably economically.

    P.S. There are even mortgages available to age 85, I believe, though maybe the bank/BS would expect to see many years of your earnings history.
    Free the dunston one next time too.
    • atush
    • By atush 8th May 18, 11:24 PM
    • 16,868 Posts
    • 10,520 Thanks
    atush
    • #9
    • 8th May 18, 11:24 PM
    • #9
    • 8th May 18, 11:24 PM
    Yes, as you own the company you really shouldnt be paying 40% tax.

    Once deposit achieved, get company pensions for both of you, paid by the company. As a business expense it will lower your corporation tax.
    • nrsql
    • By nrsql 9th May 18, 6:16 PM
    • 1,765 Posts
    • 604 Thanks
    nrsql
    And when you are 55 you can take a 25% tax free lump sum (unless rules change).
    You can pay up to 40k per year and utilise previous years.
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