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Property V Pensions (Five Live This Morning)

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On BBC radio Five Live this morning ~7.30 was an article saying HSBC report only 40% of British households have a pension (sounds very low to me but anyway...)

A caller said he couldn't afford a pension, and all his friends said property was better than a pension anyway.

However, they then quoted a texter who said her pension was two properties "both in negative equity, and both in rent arrears - so much for planning".

Andy Verity then repeated that pensions have tax breaks that property doesn't, and that property is NOT the answer.

Just thought you'd be interested. I usually feel the radio (and Andy in particular) is more pro-HPC, looking out for FTBs, whereas the BBC website often appears more pro-HPI (I guess trying to align with the majority of the country's attitude).

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Pensions for high earners are much much more tax efficient than property. Also, I think a lot of BTL are tax free anyway, as people don't declare them? Am I correct?

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On BBC radio Five Live this morning ~7.30 was an article saying HSBC report only 40% of British households have a pension (sounds very low to me but anyway...)

A caller said he couldn't afford a pension, and all his friends said property was better than a pension anyway.

However, they then quoted a texter who said her pension was two properties "both in negative equity, and both in rent arrears - so much for planning".

Andy Verity then repeated that pensions have tax breaks that property doesn't, and that property is NOT the answer.

Just thought you'd be interested. I usually feel the radio (and Andy in particular) is more pro-HPC, looking out for FTBs, whereas the BBC website often appears more pro-HPI (I guess trying to align with the majority of the country's attitude).

Aye, and from 6-7 am they had a woman from HSBC on who they quizzed about this report as well. She kept mentioning how people could save 'the cost of a coffee a day' (£2.50?) from when they start working and by the time they retire they could have a £750k pension pot :lol:

Thankfully the presenter pointed out that most people can't even spare that much after paying off student loans, saving for a mortgage, etc.

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£2.50 a day? Thats less than £1000 a year. Assuming a 50 year working life, no jobless periods!, that only £50k plus compound interest, also include employer contribution and tax savings, for maybe £150k to £200k. how the ... Does she get to £750k unless she takes into account inflation. At which point its no longer the price of a cup of coffee! Given how pension funds have performed the kind of increases she is suggesting are highly ambitious.

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£2.50 a day? Thats less than £1000 a year. Assuming a 50 year working life, no jobless periods!, that only £50k plus compound interest, also include employer contribution and tax savings, for maybe £150k to £200k. how the ... Does she get to £750k unless she takes into account inflation. At which point its no longer the price of a cup of coffee! Given how pension funds have performed the kind of increases she is suggesting are highly ambitious.

Agreed, totally bonkers and if it the maths worked out in the manner suggested everyone would have a good pension without a problem. It's just insincere B.S. to get more sales. As you say, you'd be lucky to get an income of £5k p.a. at toda'ys prices for that contribution.

Edited by cheeznbreed

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Pensions for high earners are much much more tax efficient than property.

Unless you are paying higher rate tax, there isn't a great deal on incentive to invest in a pension. Pensions are only worthwhile if you are paying 40%+ tax when you stick the money in, and paying 20% tax when you withdraw it.

To put £5K/annum in, as a basic rate tax payer that is £4K net that has to be paid in. For a higher rate tax payer it is £3K or even £2.5K net. And the higher rate tax payers are more likely to fund the pension more.

Do that over 40 years and with a bit of luck your fund may be £300K and you can get a lump sum of £75K and an income of £10K/annum. Thing is after putting in £5K/annum you have to live for about 20 years to get that back ignoring any inflationary impact. And you pay tax above your allowance.

Little wonder most people don't bother.

Edited by arrgee1991

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On BBC radio Five Live this morning ~7.30 was an article saying HSBC report only 40% of British households have a pension (sounds very low to me but anyway...)

..many that do have a pension, for what it is worth will only probably buy them a cup of coffee a day at the point in time they decide they want to make use of it. :o

...it is not a case of if you have a pension rather than will that pension or pensions you do have pay enough to give a quality of life you are expecting it to.....in many cases I think not.....but tomorrow is another day. ;)

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Agreed, totally bonkers and if it the maths worked out in the manner suggested everyone would have a good pension without a problem. It's just insincere B.S. to get more sales. As you say, you'd be lucky to get an income of £5k p.a. at toda'ys prices for that contribution.

Why is it bonkers? I calculate about £600,000 2.50 per day, from age 20-65 45 years, compounded at 8-10% inflation 4% Its possible, 8-10% return on investment is certainly realistic, you could probably do much better if your good at investments.

The point is that you dont have to save much to have a big pension. Just make sure its tax efficent, and you start early so the returns compound. A £1000 investment after 45 years at 8% is £30,000

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However, they then quoted a texter who said her pension was two properties "both in negative equity, and both in rent arrears - so much for planning".

Take out 2 (not one) mortgages at peak (low deposit), using debt to fund a pension. What could possibly go wrong? ... oh.

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Unless you are paying higher rate tax, there isn't a great deal on incentive to invest in a pension. Pensions are only worthwhile if you are paying 40%+ tax when you stick the money in, and paying 20% tax when you withdraw it.

To put £5K/annum in, as a basic rate tax payer that is £4K net that has to be paid in. For a higher rate tax payer it is £3K or even £2.5K net. And the higher rate tax payers are more likely to fund the pension more.

Do that over 40 years and with a bit of luck your fund may be £300K and you can get a lump sum of £75K and an income of £10K/annum. Thing is after putting in £5K/annum you have to live for about 20 years to get that back ignoring any inflationary impact. And you pay tax above your allowance.

Little wonder most people don't bother.

I agree that its only worthwhile for 40% tax rate payers, that what I meant by high earners. But remember of that tax rebate, its effectively almost 70% ROI which is guaranteed, which is impossible to beat with any investment. Of that rebate 50% is tax free refunded, and then 25% of the pension is also tax free. A lot of the pension comes back tax free, in the end and certainly 100% of it grows tax free the whole time.

The simple fact is you will need a pension in old age, or live in poverty, or work if someone will hire you at 70!

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Why is it bonkers? I calculate about £600,000 2.50 per day, from age 20-65 45 years, compounded at 8-10% inflation 4% Its possible, 8-10% return on investment is certainly realistic, you could probably do much better if your good at investments.

The point is that you dont have to save much to have a big pension. Just make sure its tax efficent, and you start early so the returns compound. A £1000 investment after 45 years at 8% is £30,000

And herein lies the problem with long-term investments. An average 8-10% over 40 years, after the ~1% per year the fund managers skim off? Do me a favour!

Over the last 5 years my company-run (Standard Life) stakeholder pension is worth only a few % more than I have paid in over that time - take out RPI inflation (or CPI) and it's worth less now than I've paid in. :(

(I don't have an option to run it as a SIPP, although the company matches the % I pay in so it's not all bad.)

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£2.50 a day? Thats less than £1000 a year. Assuming a 50 year working life, no jobless periods!, that only £50k plus compound interest, also include employer contribution and tax savings, for maybe £150k to £200k. how the ... Does she get to £750k unless she takes into account inflation. At which point its no longer the price of a cup of coffee! Given how pension funds have performed the kind of increases she is suggesting are highly ambitious.

yes, over 50 years paying in £75 a month you'd need a return of about 8% to get £750 k ....and such high returns normally imply inflation of about 5% pa which over 50 years would be about 1100% compounded.....meaning the £750k in 50 years' time would be only worth about £65 k in today's money!

Misling people with inflation in this way was one of the biggest tricks of the pensions misselling scam in the 1980s........

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And herein lies the problem with long-term investments. An average 8-10% over 40 years, after the ~1% per year the fund managers skim off? Do me a favour!

Also with the tax man creaming off dividend tax. Averaging 8-10% or more is possible, but you need a lot of luck in getting into the right funds at the right time. You could be very unlucky and see your fund collapse in value a few years before you retire with little scope for rebuilding it.

Pensions are only worth the gamble for higher rate tax payers who have large company contributions. In my last but one job, my employer/tax man was putting in 18% of my salary, when I only had to give up 3% of my salary. No-brainer to get a pension in those circumstances, but not when you give up £4K net to get just £5K in.

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I don't understand the obsession with living forever comfortably. That said I don't really intend to live past 35.

36 is when the real fun begins though ;)

Edited by SHERWICK

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Why is it bonkers? I calculate about £600,000 2.50 per day, from age 20-65 45 years, compounded at 8-10% inflation 4% Its possible, 8-10% return on investment is certainly realistic, you could probably do much better if your good at investments.

The point is that you dont have to save much to have a big pension. Just make sure its tax efficent, and you start early so the returns compound. A £1000 investment after 45 years at 8% is £30,000

A 9% annual return, with dividends re-invested, used to be the agreed benchmark that actuaries would use to project pension returns. Based on the post war returns up to the year 2000 that was a reasonable assumption. Problem is very, very few funds have consistently managed that since the 2000 dot.com crash.

Personally I think this level of stock market return is realistic going forward, but when you've just come off a crap decade for shares and a wonderful decade for property, then most people just put a ruler on the chart for the last ten years and assume the same pattern for ever more.

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I'm surprised that there doesn't seem to be a pension thread anywhere in hpc.

Given the current economic climate, does it make sense to trust in this type of ponzi, or would it be better to try to make your own investments to save for retirement?

I'm in my early 30s, but just can't help thinking that many pensions will be next to worthless by the time I'll need them to pay out. :huh:

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A 9% annual return, with dividends re-invested, used to be the agreed benchmark that actuaries would use to project pension returns. Based on the post war returns up to the year 2000 that was a reasonable assumption. Problem is very, very few funds have consistently managed that since the 2000 dot.com crash.

Personally I think this level of stock market return is realistic going forward, but when you've just come off a crap decade for shares and a wonderful decade for property, then most people just put a ruler on the chart for the last ten years and assume the same pattern for ever more.

An average return of 9% over 40 year is realistic, but as the last decade has shown it can be less.

Even with 9% growth, low annuity rates of less than 5% (and falling due to increased life expectancy) mean that you have to make very large contributions or get lucky with your fund choices to build up a worthwhile fund.

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I'm surprised that there doesn't seem to be a pension thread anywhere in hpc.

Given the current economic climate, does it make sense to trust in this type of ponzi, or would it be better to try to make your own investments to save for retirement?

I'm in my early 30s, but just can't help thinking that many pensions will be next to worthless by the time I'll need them to pay out. :huh:

Just make sure you have a pension of some sort, whether it be gold or the mattress, otherwise, you face bleak job prospects in old age and poverty, with that attitude.

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Does it make sense to trust in this type of ponzi?

Would it be better to try to make your own investments to save for retirement?

No, state pension will get lower as it will get harder to justify, so you will have to work longer (if you can).

Yes, but pensions aren't the only way. Stocks & Shares ISAs, NS&I Certs, Gold, Fine Wine, Property (when it is rock bottom), even the odd lottery ticket or two. Or just create your own business and live off the profit. If you can make money selling vegetables, learn how to grow them. Be resourceful and look for opportunities. Best way to prepare for retirement is to do as much as you can whilst you are able.

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36 is when the real fun begins though ;)

Don't know about that. I look back on my life as pre-36 and post-36.

I was 36 when we had first child. Life has never been the same since.

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with that attitude.

Eh? What attitude?

I simply asked a question - pension scheme or some other means?

The money I pay into my pension now goes to people currently or soon to be in retirement, so I'm relying on future generations to pay into the same scheme....I was wondering if it wouldn't be safer to hoard gold under my mattress, this way I'd know there would be something real for when I'm too old and infirm to put my nose to the grindstone.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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