Reply to: Pension options as ltd

[glashIFA@Paramount]

If 10 or more get together a syndicate then you can invest in residential property. A leaseback arrangement of residential property is considered commercial and go into a SIPP.

Sounds simple when you condense it into 3 lines. What you're talking about is what the revenue call a Residential Genuinely Diverse Commercial Vehicle (RGDV) and before people get too excited folowing Bradley's posting you should also know that there are other rules.
No private use of the properties.
Minimum combined value of £1,000,000.
At least 3 properties.
Maximum holding of 10% per individual.
No one property to account for more than 40% of the total value.

So, if finding minimum of 9 other like minded individuals is not hard enough and forming a suitable ltd company and documenting all things, then you have all these other criteria to meet.

For individuals (not syndicates) there is NO facility to invest via your pension into residential property.

[Bradley]

syndicate

Follwing on from Gordies reversal in the last PBR, direct investment into residential property is not allowed within a pension. However, commercial property investment is, for instance, a ltd company could purchase / part purchase their premises or any other commercial premises. Investment into residential property would be via a fund of REITS (Real Estate Investment Trusts)

If 10 or more get together a syndicate then you can invest in residential property. A leaseback arrangement of residential property is considered commercial and go into a SIPP.

[glashIFA@Paramount]

... I might add this question: why would it be good for the Ltd Co to do this?

I know why it would be good for you, but you are not the company. Why would it be good for the company?

If the answer is, it's not good for the company but it is good for you, then what you are talking about is a benefit that the company pays you.

Pensions are designed to be a benefit to individuals not companies and so they're never really that beneficial to the company unless you're looking at soemthing like a SSAS which has a loanback facility or looking to buy the company premises.

It's simple really. Whatever is in the pension is an asset of the pension and will always remain in there. You can't put things in then take them out. If it's property then the benefit is no Capital Gains Tax on disposal but when the property is sold (which it will have to be at some time) then the sale proceeds remain in the pension fund and are used for the benefit of the individual.

[oxtailsoup]

If the answer is, it's not good for the company but it is good for you, then what you are talking about is a benefit that the company pays you.

Point taken. But surely if you just put the money directly into a personal pension that has full tax relief then that amounts to the same thing? i.e. The company isn't going to benefit but you are personally (in retirement). Yet this is allowed?

I'm not doubting your comments, I'm sure you are correct. I've also heard myself before that commercial property investment is ok whereas residential is not.

I'm just confused with the above argument.

[Euro-commuter]

Can you create a pension that buys a property? i.e. you put some of your Limited Companies income into a buy to let property but wrap it all up in a pension? So the company wouldn't get taxed on this expenditure?

... I might add this question: why would it be good for the Ltd Co to do this?

I know why it would be good for you, but you are not the company. Why would it be good for the company?

If the answer is, it's not good for the company but it is good for you, then what you are talking about is a benefit that the company pays you.

[glashIFA@Paramount]

Even if the plan was genuinly to get a few BTL's for an income in retirement? i.e. they funds and assets would always stay in the pension fund?

Follwing on from Gordies reversal in the last PBR, direct investment into residential property is not allowed within a pension. However, commercial property investment is, for instance, a ltd company could purchase / part purchase their premises or any other commercial premises. Investment into residential property would be via a fund of REITS (Real Estate Investment Trusts)

[Euro-commuter]

Even if the plan was genuinly to get a few BTL's for an income in retirement? i.e. they funds and assets would always stay in the pension fund?

The word is "unbreakable" in unbreakable commitment. They are not interested in the fact that you want to save, they are interested in a guarantee that that money will be used to take a load off their budget later. How could they be sure that the assets would always stay in the pension fund and would be guaranteed to provide for you in retirement?

I am not doubting you personally: I'm just commenting that the govt will not want to let you off tax now unless they can be sure that it's good for them.

[oxtailsoup]

Even if the plan was genuinly to get a few BTL's for an income in retirement? i.e. they funds and assets would always stay in the pension fund?

[Euro-commuter]

Can you create a pension that buys a property? i.e. you put some of your Limited Companies income into a buy to let property but wrap it all up in a pension? So the company wouldn't get taxed on this expenditure?

Nope. The govt knows that not paying tax is a good deal, and only offers it for something really good in return. Essentially they are looking for an unbreakable commitment from you to put that money into something that will take the load off them later after you have retired.

[oxtailsoup]

property

Can you create a pension that buys a property? i.e. you put some of your Limited Companies income into a buy to let property but wrap it all up in a pension? So the company wouldn't get taxed on this expenditure?

Example.
Bill £100k per year through Ltd Co.
Spend £50k of that towards a property (BTL) wrapped up in a pension.
Just get taxed on the remaining £50k (of which you will take a salary and divi's etc).

[ASB]

I still need to know how much is enough to put in, pecentage wise of total earnings
css_jay99

An actuary once said "20% of all the money you ever make".

[glashIFA@Paramount]

The problem is that I dont seem to have any confidence in pension system state or private, bcos i just think that in 20yrs time they could get it all wrong and we are the ones that are going to suffer.

I am on the assumption that If a person manages to buy 1 or 2 more properties and lets them out, that the rental income on retirement ( assuming motgage paid off) will be more than adequate to live on as a pensioner irrespective of cost of living. Afterall most (Normal) people pay at least 45% of their monthly income on rent/mortgage and that percentage is only likely to grow up

any one of this opinion ?

css_jay99

Couldn't agree with you more on the state system. We've already seen them default twice in recent yrs. Raising state psn age to 68 and reducing max benefits available from SERPS (now S2P).
For a private psn just think of it as an investment with tax breaks. As already mentioned earlier in this thread because of the tax relief you get a return without the investment having to do anything. Also, because it's PERSONAL the only person who can screw it up is you. Admittedly the gov't can change legislation like they did last April but the changes were actually for the better and improved most peoples options.
Potential problem with a couple of BTLs is that they only produce when they're occupied and you're heavily exposed to one asset class. If you own your own property and a couple of BTLs and the property market takes a downturn then it will make a big whole in your net worth and your ability to generate income in retirement.
i think a "bit of both" would be the best situation backed up with various investments, ISAs, Unit Trusts etc.
If you see property as the best asset class going forward then use your psn to invest in a good property fund.

[css_jay99]

cheers ,

looks like i am going to have to rob the bank to retire comfortably !

otherwise, Any rich girls i can sponge off here! , I have got lots of good qualities honestly !


css_jay99

[Bluebird]

"I still need to know how much is enough to put in, pecentage wise of total earnings"

As I said it depends on 2 things -

1. How long you want to carry on working for
2. How much you think you need when you retire [ don't forget I think the minimum age you can get a pension payout is 55 ]

The % you require will be higher the lower 1. is and the higher 2. is

Try puttin some figures in this calculator to see whats what.

http://www.pensioncalculator.org.

[css_jay99]

Have you thought about moving out of your 5 bed detached in Chelsea to somewhere more affordable?

Wish I live there mate, at least it would mean i could afford that lifestyle. Ok more like 20% then.
God knows back in permie days I had a period where rent accounted for 60% of my earnings, Now its differrent, the Ex if she has her way would probably want to take all my earnings!

If you have your own limited company set up you can take the funds directly from the company into the pension hence not paying any national insurance on the monies.

You can also claim back your cooperation tax as well meaning that for every £119 you add to the pot you can claim back £19 in tax. (assuming the 19% cooperate tax on profits between £1-300,000)

If you earn PAYE then the Gvt will match your tax, ie for someone paying 40% tax then for every £60 put in the Gvt will put in £40 etc

This is what makes pensions more attractive than ISA’s for long term savings as there is immediate growth before the fund does anything. It also needs to be in the right vehicle and so on.

As always don’t keep your eggs all in one basket have ISA’s and other things on the go as well…

i have a couple of Normal ISA's but the rates on them are very pittyfull.

last year I put 5k in ISA's and equally same amount on the stock market. My return of sale & divs was about 4 times more than interest received on those ISA's which hardly keep up with real(i.e not what Gordon tells us) Inflation on the streets

I do agree that its best to put in different ports. I might use this pension business as a way of keeping ex off my money.

you are right about buy-2-let, however your return / pension is based on the assumption that somebody actually wants to rent your property.

the other thing to consider is that even if you buy a new property now in 20 -25 years you will still have to pay money to maintain it and keep it upto health & safety standards - I know there are companies that can do this for you but it all erodes into your 'income'.

yeah but even after repairs, surely there will still be enough money left to live on !


I still need to know how much is enough to put in, pecentage wise of total earnings

css_jay99