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Guest struthitsruth

Public Gain, Private Pain

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Guest struthitsruth

"The world of pensions has changed. The days of paternalism are over. This isn't a sign of bad employers, but ones who are facing up to today's challenges. It's a pity the Government, in charge of an ever-burgeoning public sector, is not being as responsible with taxpayers' money."

"Our survey of FTSE 100 companies shows that more than 80 per cent of the UK's biggest - and wealthiest - companies no longer offer final-salary pensions to new employees. Only a handful of companies, mainly in the oil and energy sectors, still provide these benefits to all staff."

http://www.telegraph.co.uk/money/main.jhtm...6/ixperson.html

Is anybody really surprised at the rise of buy-to-let as pension provider after reading this ?

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Yes - because it is a pretty stupid way of providing for a pension.

(1) no diversification away from UK PLC

(2) no tax advantages (unless you SIPP)

(3) High costs (either retiree has to continue running what is effect, a small business, or they will have to hand over to a letting agency & pay high fees)

(4) Regulatory risk - landlord/ tenant law & regulations are subject to dramatic change (HMO/ AST)

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Yes - because it is a pretty stupid way of providing for a pension.

(1) no diversification away from UK PLC

(2) no tax advantages (unless you SIPP)

(3) High costs (either retiree has to continue running what is effect, a small business, or they will have to hand over to a letting agency & pay high fees)

(4) Regulatory risk - landlord/ tenant law & regulations are subject to dramatic change (HMO/ AST)

Let's say you had £30k to put down as a deposit 4 years ago on a BTL in East London. Very broadly speaking you could have bought £850 pcm rent vs £600 mortgage on a repayment basis. A little house - the sort that suits a couple or young family or perhaps someone a little older scaling down. Assuming you are young and reasonably clued up you let and manage yourself. Your £250 positive cashflow per month goes on insurance, voids and into a fund for repairs.

In 25 years you have a property which you own outright, and is paying more in real terms than it was when you bought it (rents, as well as capital values tend to rise slightly above inflation in the long term). You have taken a little income out of it in that time as well.

I tend to think that people spend a third of their income on housing. If you own your home and 1 BTL outright then you are two thirds of the way to having a 'reasonable' standard of living for the type of property you live in (assuming your BTL is a similar property). By the time you own it outright the management fees of handing it over to an agent shouldn't matter too much.

I'm not saying BTL as a pension is the answer for everyone - at today's prices I am less convinced it is a good investment for anyone. But to write it off completely is ridiculous.

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Guest struthitsruth

http://www.telegraph.co.uk/money/main.jhtm...6/ixperson.html

Is anybody really surprised at the rise of buy-to-let as pension provider after reading this ?

Yes - because it is a pretty stupid way of providing for a pension.

Well, my post should have read "supplementary pension provider" then, I stand corrected.

(1) no diversification away from UK PLC

. . . . as above, see "supplementary"

(2) no tax advantages (unless you SIPP)

not major ones, agreed that income from letting is liable, but then again, maintenance expenses are allowable, and maintaining a house well can be costly - re-pointing, upgrading loft insulation, damp courses etc, can all be offset against rent

(3) High costs (either retiree has to continue running what is effect, a small business, or they will have to hand over to a letting agency & pay high fees)

Agencies do take a high cut for "full management" but self managed options can be as low as 8% of first six months rent for "tenant find and vetting" only

(4) Regulatory risk - landlord/ tenant law & regulations are subject to dramatic change (HMO/ AST)

now that's a good point that I haven't heard mentioned before, and one well worth thinking about.

Really my point when posting the topic is, whether people succeed or not, and whether it works well for them or not, are you surprised that the number of BTL's entering the property market in the last decade, and the last 5 years in particular, has soared ?

:unsure:

Edited by struthitsruth

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FF - good points, but the average household spend on housing is 10-12%, not 1/3rd... (e.g. one sister and my parents own their houses outright)

Rents > inflation? Tell that to someone owning a property with a tenancy signed under the old tenant laws... I once worked in an office where the rent hadn't increased since 1948 (this was late 80's) That's what I mean by regulation risk.

To me, as a pension, it is far too risky to have such high proportion in one basket, but ymmv. Relying for 1/3 of your retirement income on one BTL - ouch.

(ps I do invest in property, have a small development going with relatives in Indonesia, and some REITS, but <5% of assets)

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Really my point when posting the topic is, whether people succeed or not, and whether it works well for them or not, are you surprised that the number of BTL's entering the property market in the last decade, and the last 5 years in particular, has soared ?

:unsure:

The reason I chose B2L and other investments over a pension is really down to the fact that a pension is inflexible and you have no control.

With my own investments I choose when I want to start drawing income (pensions have minimum ages, usually 55+), and more importantly I CAN LEAVE ALL MY INVESTMENTS TO MY KIDS, where - as pensions return entirely or to a high degree to the provider of the pension or annuity.

Also with a pension you have to buy an anuity with 75% of your pot on retiring. Annutities themselves are expensive, inflexible and at risk if the annuity provider goes bust in a global depression. NO THANKS.

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There is nothing wrong with risk but in a pension risks have to be carefully managed. A single investment that takes up more 50% of your portfolio strikes me as an unacceptble risk. A road built in the wrong place, a bad tennant or a change in tax legislation can turn a valuable property asset into a dangerous liability overnight.

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  • 301 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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