Property vs pension
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  1. #71

    Nervous Newbie

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    Quote Originally Posted by b0redom View Post
    OP, I've got an ISA and a B2L property in W. London but no SIPP. I did similar number crunching to you and worked out that I'd have to live for ~ 20 years before I'd exhausted the principle in a SIPP, never mind the compound interest. Then what happens if you shuffle off this mortal coil after 5 years? Nothing to give to the kids.

    I reckon I'll continue to try and max out the ISA, then pay off the residential mortgage (just about to remortgage with an offset mortgage). Once that's done I'll start to look at a SIPP.
    If you shuffle off this mortal coil after 5 years your SIPP would be passed on to your chosen beneficiaries. If you're considerate enough to die before you're 75, it would be tax-free. (https://www.youinvest.co.uk/pensions...ipps-and-death). Anyway, you should probably be buying life insurance if you're worried about the kids.

    Because of the tax breaks it's more efficient to pay into a SIPP than to pay off a mortgage. It depends on your mortgage rate but with the current level of pension tax relief it would take a pretty high mortgage rate for the opposite to be true. I stopped overpaying my mortgage a while ago because of this. That's true even for a basic rate permie. If you're a higher rate taxpayer (or would be if you took all your profits), the pension payment is even more efficient.

    Of course, going the B2L and ISA way you have access to leverage on a mortgage and liquidity and certainty that a future government aren't going to change the pension rules.

    But B2L landlords are an even more popular target for governments who see lots of voters angry about not being able to afford a house. House prices are at such an insane high that 40% of Brits are thinking of voting for a man who thinks Venezuela is a good economic example to follow.

    If you're buying to let now you're going to pay a higher rate of stamp duty and, assuming you're not a cash buyer, soon you're not going to be able to get tax relief on interest payments. Moneyweek reckon the game is over: https://moneyweek.com/the-buy-to-let...t-happens-now/
    Last edited by BlandResponsibleName; 14th November 2017 at 17:59.

  2. #72

    More time posting than coding

    wantacontract is too good to be a permie


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    Quote Originally Posted by WTFH View Post
    My point being, while mortgage rates are still low, that's when you should be clearing that debt, rather than paying more when the rates rise. Some people seem to think that low rates means borrow more, but really it's the best time to clear your debts. Once you're debt free then you can look at taking riskier investments and you can put your money into savings (with the likely increase in interest rates).

    If your life insurance is 10 a month and covers 500k, then go for it. If it's closer to 50 a month, then I'd say use some of your cash to clear your mortgage, then you don't need as much life cover and with the mortgage gone you can invest more.
    interesting viewpoint, depends on your attitude to risk I suppose. I plonk in 40 a month, and that gets me health and life insurance, cover 250k.....i think it's more than reasonable......the health insurance covers the kids too....

  3. #73

    Prof Cunning @ Oxford Uni

    WTFH is a fount of knowledge

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    Quote Originally Posted by wantacontract View Post
    interesting viewpoint, depends on your attitude to risk I suppose. I plonk in 40 a month, and that gets me health and life insurance, cover 250k.....i think it's more than reasonable......the health insurance covers the kids too....
    I changed my strategy after having friends die in their early 50s and saw what happened to their family finances.
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