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arrgee1991

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Everything posted by arrgee1991

  1. As a investment, I mostly agree, but given that housing costs one way or another it is one of those rare things where it is possible to profit on something you consume post purchasing. I've only bought to live in a place and if having spent 10 years there the overall cost (deposit + redemptions + interest payments + maintenance + improvements + insurance + sundry costs) is less than I sell it for then that's not too bad. Property is too much hard work as far as investing is concerned.
  2. That has probably been true this century. Ironically I'd say anyone buying between 1992 and 1997, particularly in the midst of no stamp duty in a falling market has not lost out. I'd be surprised if anyone in London/South East really makes on property these days. With stamp duty of 3-7% and associated fees thrown in when buying/selling, you'd need a 10% gain just to get even.
  3. If you have a good employer and a good scheme fine. But looking at my older pensions they are all worth less than £10K which is about what the employer put in and any gains have been eaten up with taxes/charges. If people don't make contributions they have small pension pots.
  4. Only time I had a fixed rate was 10% back in the 1990s. I paid for that when the UK left the ERM and rates nearly halved. BoE and government won't raise rates unless they want a million homeless. Most I can see them edging up is by 2% in next four or five years. Over that time span variable rates will more than pay for themselves.
  5. They used to, but less than 1% in fees is quiet common now. One of our local EAs is offering to sell for £150+VAT (£180) . If I was selling I'd take them up on that.
  6. Where we live, very few properties ever make it to the EA window. We ended up staying as the buyers withdrew for personal reasons and the best offer we got afterwards was 10% less than the original offer which meant it wasn't possible to move to the house we eventually found in a similar way with another EA letting us know before it even hit the market. There are few buyers and even fewer sellers, and EAs can't make much selling houses so they do as little as they possibly can.
  7. They sure are, every time you get a fix the mortgage providers charge an arrangement fee. Anything up to £2000 How about this "deal" from Skipton.... Fixed until 31/05/16 3.89% 5.49% 5.5% 90% £1995 fee
  8. Part-redemption was the best means of saving prior to 2008 and like you I just continually overpaid. Then my mortgage rate dropped to 2.5% and as I had ISAs that were paying 3.75% I stopped. When I needed some money for house improvements, I was able to draw on the overpaid balance rather than dipping into my savings. The flexibility of variable rate interest only mortgages has worked in my favour by paying down when I could.
  9. There are many people who don't have a pension pot at all. As for the average, that could be explained by my general employment history up to 2005 which has meant I took the company contribution but never added a penny of my own. You are better off starting your pension when you get old. Without incurring tax penalties, which invalidates the reason for getting a pension, the most you can put in each year is £40K and should your fund exceed £1.25 million you get taxed. The best policy is to look at pensions as tax deferment. Save 49% tax now and get it back at less than 20% later. Great when you are within five years of retirement, but not if you are forty years away.
  10. A number of people in their 40s and 50s didn't pay anything for their education (probably got decent grants like me) and then proceeded to buy readily available property which allied to a lack of foreign competition for employment meant they have all done pretty well without trying. I bought my first house back in 1992 with a pretty modest salary, but that house would be way beyond my current income after twenty odd years of career progression. Truth is those in their 40s and 50s (self included) haven't earned anything, and expecting those currently in their teens to fund their future lives is unrealistic. If I was graduating nowadays, I'd be heading to foreign climes.
  11. It doesn't make sense for young people to get pensions for a whole multitude of reasons. You could die young, you may not be paying higher rate tax, time means the whole regime could change. The real beneficiaries of pensions are older people (40s and 50s) who can see the light at the end of the tunnel and have a small degree of certainty. If you can pay £40K from your gross then the net cost with tax and NI removed is around £20K or even less if you have kids and are reducing your salary to get child benefit or reducing your salary below the £100K threshold. Then when you get your £40K out (with no growth), you get £10K tax free and basic rate tax at 20% (no NI) for the remaining £30K So for £20K (or less) in you get £34K out.
  12. Uncertainty around Interest rates? They have been rock bottom for five years, how much more certain can they be? I agree the only way is up, but in all likelihood they will only edge up 1-2% in the next couple of years. Also all these fixed rates come to an end in 2-5 years and then you get stuck on the rate the mortgage provider decides to stick you on. Fortunately I got onto the Nationwide BMR along with around ¾ million others which they can't touch without stirring up a real hornet's nest. Best 2 year fix 2.79% reverting to 3.99% (or whatever the rate is at the time) Best 3 year fix 2.39% reverting to 4.99% (or whatever the rate is at the time) Best 5 year fix 2.95% reverting to 4.99% (or whatever the rate is at the time) Best variable 1.99% (tracks BoE rate) So unless rates rise by 2-3% very quickly, variable looks like the better bet.
  13. They can, but the main advantage EAs have is knowing who is looking and what they will be prepared to pay. There are a lot of properties that don't even make the market. We invited an EA around a few years ago who told us he had a couple on his books that would pay market value and slashed his commission to 0.5%. They duly viewed and made an immediate offer. It was in the EA's interest to not let us tout our property so they will tell you what you can achieve and make the necessary introductions. Had I advertised I may not have set the right price or not reached the couple prepared to pay that much. Pricing a house is tricky. Nothing has sold in our street for about three years, so I wouldn't know what people are prepared to pay. Price needs to be set to attract viewers and get a good offer.
  14. Agreed. Most of the estate agents in our part of London get most of their business letting. Sales volumes and commissions (less than 1%) are too low to make enough profit. Most see sales as a lucrative sideline.
  15. Lend? I suspect many will just give it away, certainly if they end up with assets over £650K. With a fund of £1.25m, giving the tax free lump sum of £312K to the grandchildren would be a way of avoiding IHT.
  16. This is probably the most likely reason. Once people consider their IHT liabilities and the potential for paying for care, they may think annuities aren't such a bad deal. I expect there will be better annuity products in forthcoming years which when not restricted to gilts will pay closer to 10%/annum. At those rates, an annuity starts to become attractive. The problem prior to the announcement was that compulsion on the pensioner to eventually buy and annuity and the insurance company to invest in gilts was that this guaranteed low returns.
  17. Pretty unlikely that hose who have IO mortgages and significant BTL will have big pension pots as well. The general mantra of those who buy property is the "safety of bricks and mortar" and they put all their spare cash into property. Their belief is that one day they will sell and realise a profit. They are more likely to retain the tenants until they die, and then give the government the 40% IHT. Also paying 40% or even 45% on a large proportion of the lump sum will see many just leave the fund intact. I don't know what the true reasoning behind the decision was, but the cynic in me says it is more to do with increasing the tax grab from IHT and VAT. That written, I see Cameron is talking about increasing the threshold. Until that happens, those that are capable of maximising their fund to the £1.25m limit will have to spend half their fund when they get it.
  18. The best thing to do when you are old is spend it all and max out your credit cards as the taxman takes 40% of anything over £325k (double if you are/were married). If people hang onto their pension or invest it, it will be a bonanza for the tax man.
  19. Agreed. Generally most pension contributions are the default company contributions and people end up with smallish pots (less than £100K) that wouldn't generate much income. Those with large pots that would generate a decent income (say £1million) will most likely have other assets and savings, so being forced to take a low income generating annuity makes no sense as opposed to a drawdown arrangement. The main justification for annuitising a fund for the larger pot holders is reducing IHT liability but they are likely to be attracted to income generating products not based on low yield gilts that would allow the generation of higher incomes. And rather than spending the whole pot on one annuity, they can have a mix of funds, so they can obtain a minimum income, but with the prospect of enhancing it by taking on some risk.
  20. Or another foreign war. Or whatever else taxes are squandered on.
  21. Fine by me as well. Never earned a penny from my house. It may be worth half a million, but it's not like I can sell it and realise any profit unless I want to live in a box. Maybe when I retire I might be able to sell up and move somewhere cheaper. I think BTL is madness. Borrowing excessive money to get a 5% yield. By the time the mortgage is paid, there can't be that much profit. And as for the capital gain, well unless you are flipping that attracts plenty of tax as well.
  22. I would say the opposite is true. Individuals and companies have less personal responsibility and freedom to make decisions. As for the state bailing out banks and QE, they should have let the banks go bust and paid individuals the Deposit Protection Compensation Limit of £50K. Would probably have been cheaper.
  23. That's why there's a £40K annual limit that benefits from tax relief. But in principle, you are right. I suspect many will pay in up to the £40K limit until the fund hits £1.25m (the annual limit) and borrow to make up for any shortfall. Once retired the £312K lump sum will take care of any loans and leave you with £938K to fritter away.
  24. Wouldn't 2.5% drawdown equate to forty years? 3.33% would be for 30 years. The calculation I made was for a £1 million pot with all withdrawals below current higher rate thresholds which I had rising by 1% per annum. The initial percentage is low, but rises over time. With zero growth and withdrawing the 25% tax free, it lasts 30 years. That ignores all other savings that could be used when the pot expires. My initial point was that this is easily modelled even by non maths graduates.
  25. There are no guarantees. If inflation takes hold it will wipe out the value of any pension pot very rapidly. Likewise if NI is merged into Income tax and pensioners start paying 30%-35% on withdrawals. Different scenarios lead to different outcomes, just a case of how much risk you care to take on. For those that are risk adverse, annuities are available. I set all growth to zero and increased withdrawals by 2%/annum, and managed to keep going for around 30 years. It didn't factor in any other savings nor property value.
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