Pension or property? That is the question....

[Napper]

As the title states, I was curious what peoples opinions are on whether they think it's better to put more money into a pension or use the money to invest in property I.e. Buy to let....

[Sir Bagalot]

I sat down looked at Pension Charges.... the stock market.... the hassle over endowments.... then decided that any spare money I have goes into property which will then act as my pension

[sideways sid]

You don't have to do one or the other.

Property is illiquid, so buying shares in property companies and/or REITs makes sense.

When funds and timeframe allow, buy property.

Obviously weigh up respective management requirements and tax-efficiency too.

So perhaps the answer is to aim to hold physical property within a portfolio that will together provide an income in retirement.

[sideways sid]

You don't have to do one or the other.

Property is illiquid, so buying shares in property companies and/or REITs makes sense.

When funds and timeframe allow, buy property.

Obviously weigh up respective management requirements and tax-efficiency too.

So perhaps the answer is to aim to hold physical property within a portfolio that will together provide an income in retirement.

[gibbon]

Both.

[Cheib]

gibbon said:

Both.

This.

You just cannot predict with certainty. "All eggs on one basket" might work very well or might be an absolute disaster...and you definitely cannot afford the disaster scenario.

A lot of people say property because of the way the market has been in this country since the 80's but it really depends which part of the country you are in.

I have personally taken a four pronged approach...pensions, ISA's, investment property and principal property. The reason I separate my home from investment property is that it a) has utility whilst you are living there and you get to enjoy it every day b) is not subject to CGT. I bought a bigger home than I needed to for me to live in as a single lad 13 years ago which was looking back a very,very good decision financially.

Also you just cannot predict what taxation will be in the future and as we've just found out pension rules have just been relaxed which makes them more attractive than previously.

[98elise]

It depends on your circumstances.

Do ypu have access to a company pension where they contribute? Are you a high rate tax payer etc.

If its just your cash and you are a low rate tax payer then property starts to make sense. If you are a high rate taxpayer with your company adding to your pot then you would be mad not to take that up.

I used to contribute to a company pension, then about 4 years ago went contracting and started investing in property.

[Napper]

I am in exactly the same position as you. I have a few relatively small company pensions but 2 years ago I went contracting. I know I can pay upto £40 / year into a pension from my business account but I could also start buying and renting property. I have about 2.5 years till my property is paid off so I want to start looking at either buying property or heavily investing into one of the pensions.

Thanks for the replies so far.

[telford_mike]

We did a bit of each, but not the BTL thing, which always seemed like a load of hassle (lazy).

The ISAs worked well, but pound for pound nothing even comes close to contributing to a company pension. We downsized our house last year, which freed up some more £££.

I'm retiring in the next 3 months with a mix of income from the company pensions and some drawdown from my ISAs.

[TwigtheWonderkid]

The higher your tax rate, the more attractive a pension becomes. 40% tax payers only pay £6 for every £10 that goes into their pot. So even a modest return on the £10 still looks a good deal.

[Welshbeef]

Or
Classic cars
Vintage wine
Rare pens and cuff links
Paintings
Farm land
Invest in a small company - say a local Hairdressers
Invest in improving yourself/further professional qualifications to earn more now


As a ltd company owner remember paying yourself a company pension contribution also reduces profit/therefore corporation tax ... So another way of deducting the tax burden.



But all eggs in one basket it could pay off it could do ok or it might not spread the risk is always the smart move unless you are an inverting expert in which case you'd not be here asking the question.

[Welshbeef]

tighnamara said:

Brave post considering your profile gives your name which takes you to your limited company details.
The above may indicate you are taking the **ss regarding your tax position!
Not the best thing to post on an open forum, especially with the information you have also provided in your profile...............

He can pay the employees whatever salary he seems fit - if that is £10k lot soon to be £10.5k per year so be it, he should also employ his wife for cleaning the office and PA/admin work for a further £10k profit reduction

[Soir]

tighnamara said:

Napper said:

The company pensions are obviously frozen and as I said they're relatively small.

As a limited company I am obviously struggling so therefore I'm on minimum wage which means I pay as little tax as possible.... On dividends I think it's 20%

Brave post considering your profile gives your name which takes you to your limited company details.
The above may indicate you are taking the **ss regarding your tax position!
Not the best thing to post on an open forum, especially with the information you have also provided in your profile...............

Normal for company director to pay themselves min NI level (£10k per annum) then earn dividends.
Perfectly legal and tax efficient (it's basically an incentive for people to employ themselves, start businesses and become employment creators)

[Napper]

Phew....... For a while I thought my accountant was letting me be very naughty

[sideways sid]

not sure where all the other info came from above, but if your business occupies premises, you could get the double-whammy by using your pre-tax money as a deposit to buy a property in your pension, which you rent back to your business.

[Napper]

I like the way you're thinking but I don't use premises for work. I simply hire me and my capabilities

[tighnamara]

Soir said:

Normal for company director to pay themselves min NI level (£10k per annum) then earn dividends.
Perfectly legal and tax efficient (it's basically an incentive for people to employ themselves, start businesses and become employment creators)

OK, no problem but it aint sometimes as clear cut as you make out, sometimes best to limit your exposure on the internet that is all I was saying.
Wouldn't wish an investigation on anyone, irrelevant if you think you are squeeky clean it aint a nice experience.

[gaz1234]

Welshbeef said:

Or
Classic cars
Vintage wine
Rare pens and cuff links
Paintings
Farm land
Invest in a small company - say a local Hairdressers
Invest in improving yourself/further professional qualifications to earn more now


As a ltd company owner remember paying yourself a company pension contribution also reduces profit/therefore corporation tax ... So another way of deducting the tax burden.



But all eggs in one basket it could pay off it could do ok or it might not spread the risk is always the smart move unless you are an inverting expert in which case you'd not be here asking the question.

[98elise]

Soir said:

tighnamara said:

Napper said:

The company pensions are obviously frozen and as I said they're relatively small.

As a limited company I am obviously struggling so therefore I'm on minimum wage which means I pay as little tax as possible.... On dividends I think it's 20%

Brave post considering your profile gives your name which takes you to your limited company details.
The above may indicate you are taking the **ss regarding your tax position!
Not the best thing to post on an open forum, especially with the information you have also provided in your profile...............

Normal for company director to pay themselves min NI level (£10k per annum) then earn dividends.
Perfectly legal and tax efficient (it's basically an incentive for people to employ themselves, start businesses and become employment creators)

The only real savings is the NI though. Dividends are effectively taxed at 20% (via CT) up to the high rate, then you pay the difference between CT and income tax on anything above.