[TodmordenLad]

As a good friend of mine used to remind me when I was putting in the customary 12 hr day at the office, "No one ever said on their death bed that they wished they'd worked harder...". How true.

[Watsey]

Originally Posted by LobB

No because you'll be getting tax relief on contributions at 40% plus. And paying tax on pension income at, most likely, 20%.

Not exactly.

Contributions and the income are each taxed at the appropriate rate. You can't claim 40% relief on contributions if your income is in the Basic Rate band (and those contributions are from personal income).

Company contributions to a personal pension are always tax-free at the prevailing Corporation Tax rate, but there's no top-up to the personal pension contribution itself.

[stefan4]

Originally Posted by teaston

This is something I really need to do, 36 and still haven’t started a pension! I’ve been earning decent money for 4 or so years now but there some massive financial loss every year so far, last year daughter born and wife off on maternity, year before wedding and honeymoon, year before bought first house!

It would be great if a knowledgeable member could advise both of us what would be our best course of action!

this is basically me. Though I've not always been making the most sensible choices (buying the m3 cp being one of them!) but then I work hard so all work and no play makes for a very dull life. I do have a property that I sent which should leave a decent base pension if we keep it.

It's very difficult with a young family to get set up for retirement, and to a certain extent I want to enjoy the time, who knows what could happen tomorrow, no point being the richest man in the graveyard!

And with all of this, I'm VERY lucky that I really like my job and I'm always itching to get back after a few weeks of anyway so while I feel like this I'll be happy to work. I must admit though, 4 days a week would be awesome

[rosstin]

Originally Posted by LobB

No because you'll be getting tax relief on contributions at 40% plus. And paying tax on pension income at, most likely, 20%.

And.. you'll get your tax free allowance of £11k like today. So you would only pay 20% tax on the next £9k.

[rich100]

Originally Posted by stefan4

this is basically me. Though I've not always been making the most sensible choices (buying the m3 cp being one of them!) but then I work hard so all work and no play makes for a very dull life. I do have a property that I sent which should leave a decent base pension if we keep it.

It's very difficult with a young family to get set up for retirement, and to a certain extent I want to enjoy the time, who knows what could happen tomorrow, no point being the richest man in the graveyard!

And with all of this, I'm VERY lucky that I really like my job and I'm always itching to get back after a few weeks of anyway so while I feel like this I'll be happy to work. I must admit though, 4 days a week would be awesome

Totally get this philosophy and I agree you don't want to put everything into saving for retirement at the expense of enjoying your life now. That said you don't want to hit retirement and find that you need to start making big compromises.

That said I would recommend getting something into place sooner than later even if you start with small contributions. You can always start to scale up those contributions as time progresses. The longer you leave it the more ultimately you'll need to put away on a monthly basis to build decent point.

The greatest advantage you have right now is time as this will enable your savings to compound and grow.

All about getting the balance right I suppose which will likely be a bit different for everyone.

[Watsey]

Originally Posted by LobB

You suggesting there are people here paying BRT on their earned income?

I bet there's some, and not everyone is pensions savvy.

[JustChris]

Originally Posted by rich100

Totally get this philosophy and I agree you don't want to put everything into saving for retirement at the expense of enjoying your life now. That said you don't want to hit retirement and find that you need to start making big compromises.

That said I would recommend getting something into place sooner than later even if you start with small contributions. You can always start to scale up those contributions as time progresses. The longer you leave it the more ultimately you'll need to put away on a monthly basis to build decent point.

The greatest advantage you have right now is time as this will enable your savings to compound and grow.

All about getting the balance right I suppose which will likely be a bit different for everyone.

@teaston ...might only be able to go for SDrive in retirement :

[....,,,,..,,..]

Originally Posted by LobB

Yeah, I forgot Brigand

Shovelling shit at the piggery only pays him minimum wage

is that sour grapes after being caught buggering those same pigs at the piggery?


I always wondered why everyone called you Smokey.

Really did not expect it was due to having a cock that smelled of bacon

[Tengocity]

I'm curious as to why folk are so keen to pay off mortgages so quickly rather than save in to a pension?

Given mortgage rates are in the region of 2%, and the tax efficiency of pension savings, plus the fact that over the long term the rate of return for pension investments will be almost certainly much higher than mortgage interest rates it doesn't appear to make much sense to me.

Am I missing something?

[Tengocity]

Originally Posted by JustChris

Brigand....and others retiring in less than 5 years or so....do you plan monitor the annuity markets, eg if you're choosing to retire and not forced and it's a bad year for annuities ... would it be better waiting another couple?

I'm. It sure it's not that simple but you get what I'm thinking. A lucky bit of timing could make 10-20% difference to your salary for 20-30 years. Hmmm.

Christ I'm such a planner....this is 25 years away for me...but as per the thread I'm curious how others are approaching this.

My cunning plan is to have a split strategy.

Use some funds to buy an annuity that guarantees some income till the day I die, no matter how long.

Use draw down for the remainder.

Reason for this is that realistically, given family history I wont live till I'm 90, and my spending through retirement is not likely to be flat. I expect to want to buy Sports cars and expensive holidays for the first few years, then less so afterwards.

So I want flexibility to make the most of it whilst I can, but to leave myself a security net for the small luxuries when I'm dribbling in a chair.

[JustChris]

Originally Posted by Tengocity

I'm curious as to why folk are so keen to pay off mortgages so quickly rather than save in to a pension?

Given mortgage rates are in the region of 2%, and the tax efficiency of pension savings, plus the fact that over the long term the rate of return for pension investments will be almost certainly much higher than mortgage interest rates it doesn't appear to make much sense to me.

Am I missing something?

Something about owning your own home. It can't be taken away etc. You're probably right though it's a cheap ish APR to pay off.

Just security really...also wanted to do it before I was 30. Missed by about 6 months!

[Tengocity]

Originally Posted by JustChris

Something about owning your own home. It can't be taken away etc. You're probably right though it's a cheap ish APR to pay off.

Just security really...also wanted to do it before I was 30. Missed by about 6 months!

Even if I paid off the mortgage early, given that property generally rises in value, all I'd want to do is buy another property (in addition or just a bigger/nicer place) anyway, so not sure I'd be in a be in a different position really.

I just can't get past the opportunity cost of overpaying the mortgage by so much that one has no private pension savings at all.

First rule of investing is have sufficient diversification to mitigate risks.

Second one is the power of compound interest. The compound effect of investment growth over a 40 year time horizon more than offsets that of the cost of interest on a mortgage.

Nevertheless, it's a nice feeling I guess.

I'll take solace in the fact that the equity in the home I've got buys me just about as nice a home outright as I've got if I moved back to Scotland!

[teaston]

Originally Posted by JustChris

@teaston ...might only be able to go for SDrive in retirement :

Perish the thought!!

[teaston]

Originally Posted by Tengocity

I'm curious as to why folk are so keen to pay off mortgages so quickly rather than save in to a pension?

Given mortgage rates are in the region of 2%, and the tax efficiency of pension savings, plus the fact that over the long term the rate of return for pension investments will be almost certainly much higher than mortgage interest rates it doesn't appear to make much sense to me.

Am I missing something?

Good point, would make more sense to get a mortgage on a second house and rent it out.

[Tengocity]

Originally Posted by teaston

Good point, would make more sense to get a mortgage on a second house and rent it out.

Yes that's true, though I'd still say it's not an either/or decision. Balance and diversification is important.

[teaston]

Originally Posted by Tengocity

Yes that's true, though I'd still say it's not an either/or decision. Balance and diversification is important.

Have to remember how much property rises in value though. My parents house cost £60k 30 years ago, it's now worth over £300k! Pension money won't rise in value anywhere near that much surely?

[Tengocity]

Originally Posted by teaston

Have to remember how much property rises in value though. My parents house cost £60k 30 years ago, it's now worth over £300k! Pension money won't rise in value anywhere near that much surely?

I think that works out at growth rate of 5.5% on average each year, so probably less than that of equities over the same period. Could be wrong and if so then no doubt someone will correct me.

Then there is the hassle and cost of owning a property and letting it out. Hard to compare the two as I think you're likely to get differing levels of income along the way from each investment over the 30 years. Maybe more with the property, which would offset the costs perhaps, but then again it's easier to reinvest dividends which is what gives you compound growth.

[chris-c]

Yup my plans for being mortgage free by 40 are that I really REALLY want a 2nd house for my 40th Birthday

[stefan4]

Originally Posted by rich100

Totally get this philosophy and I agree you don't want to put everything into saving for retirement at the expense of enjoying your life now. That said you don't want to hit retirement and find that you need to start making big compromises.

That said I would recommend getting something into place sooner than later even if you start with small contributions. You can always start to scale up those contributions as time progresses. The longer you leave it the more ultimately you'll need to put away on a monthly basis to build decent point.

The greatest advantage you have right now is time as this will enable your savings to compound and grow.

All about getting the balance right I suppose which will likely be a bit different for everyone.

yes, makes sense. when I was employed I was on a matched contribution up to 6% I think it was so it was a no brainer to take that. now I'm self employed I have the option to put a chunk into a pension at the end of my 1st year as I don't take all the money out of the business. I don't think I will do that this year, but I will most likely do that next year all being well.

[EvilDrPorkChop]

Paying the mortgage off - maybe it's different for us that are self employed compared to employed. You never know what the future might hold, you might have a few good years and then another recession might hit and then you're quiet. Sooner you've got that mortgage paid off the more security you've got. It's no good having £50k locked in a pension pot if you need it to pay your mortgage first. In my opinion the roof over your head comes first, I know people that have and will have mortgages when they're 65. What's the point in that?

On the investments side, once your own house is paid off you can then purchase another property or multiple to rent out for investments. Obviously you'd need to be careful what you invested in but do it right and you should see an increase in value and rental return. None of us will see the dramatic increases that occurred for my parents generation and many of yourselves. In 20 years my parents x5 in value. I can't ever see mine doing that.

I just don't like the idea of someone else controlling my money in a pot and locking it away till old age. If I needed access to that money now I'd be stuck, and you never know when our expiry date is going to hit!

Also I seem to recall my fathers private pension going down in value during the recession? Is that right? He's just cashed his in at 55.

[....,,,,..,,..]

Originally Posted by EvilDrPorkChop

Paying the mortgage off - maybe it's different for us that are self employed compared to employed. You never know what the future might hold, you might have a few good years and then another recession might hit and then you're quiet. Sooner you've got that mortgage paid off the more security you've got. It's no good having £50k locked in a pension pot if you need it to pay your mortgage first. In my opinion the roof over your head comes first, I know people that have and will have mortgages when they're 65. What's the point in that?

On the investments side, once your own house is paid off you can then purchase another property or multiple to rent out for investments. Obviously you'd need to be careful what you invested in but do it right and you should see an increase in value and rental return. None of us will see the dramatic increases that occurred for my parents generation and many of yourselves. In 20 years my parents x5 in value. I can't ever see mine doing that.

I just don't like the idea of someone else controlling my money in a pot and locking it away till old age. If I needed access to that money now I'd be stuck, and you never know when our expiry date is going to hit!

Also I seem to recall my fathers private pension going down in value during the recession? Is that right? He's just cashed his in at 55.

Unfortunately the UK economy is firmly linked to house prices.

Yes parents (or even older members) may have seen x5 increases in houses prices, brilliant...or is it.

Their grandchildren / kids are very unlikely to be mortgage free by they are 65.

To help them pay for those very same properties they need higher wages.

This in turn reduces our competitiveness versus other countries where housing does not influence wages.

Possibly as a taste of things to come Birmingham / West Midlands is seeing more companies move from the south to newer locations in the area.

The wage overhead is far easier to stomach outside London and other areas.

How many of our kids, grandkids will view us as an oven ready chicken, waiting for their share of the property?

[rich100]

Originally Posted by Brigand

Unfortunately the UK economy is firmly linked to house prices.

Yes parents (or even older members) may have seen x5 increases in houses prices, brilliant...or is it.

Their grandchildren / kids are very unlikely to be mortgage free by they are 65.

To help them pay for those very same properties they need higher wages.

This in turn reduces our competitiveness versus other countries where housing does not influence wages.

Possibly as a taste of things to come Birmingham / West Midlands is seeing more companies move from the south to newer locations in the area.

The wage overhead is far easier to stomach outside London and other areas.

How many of our kids, grandkids will view us as an oven ready chicken, waiting for their share of the property?

I think the oven ready chicken thing is an interesting point.

With average lifespans increasing and projected to increase still further in the next 50 years I wonder if people who think they get a decent inheritance will actually see that come to pass.

I suspect for many people in later life care costs in old age could well take a sizeable bite out of estates.