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  • Buy-to-Let

    BTL v Pension

    That’s a good point peter just shows how good it is when it’s capped

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    Learn Change and Adapt ?????

    Thanks for your thoughts on this!

    To go through each of your points:
    >>>
    to have a pension of 60k a year you would need a pension fund of around 1.2 million

    That's a big ask at 45

    But I have always said it doesn't have to be one or the other ??

    You can have both
    >>> Wow, a 1.2million pension fund! To create that would take some serious effort. Much easier with the right property ;->

    The first question I have to ask are you investing via a company or is the investment in your own name

    >>> In my own name. I can't see how a company would give any benefit in the future, as I'd rather pay a large deposit up front for future purchases.

    Just a rough calculation to create a pension fund of 1.2m in 21  years would need a monthly payment of around £1800 at a growth rate of 8%
    >>> £1800pcm is a lot of money to put into a 'hope fund'! I just think of all I could do with that money.

    If you were doing this via personal pension it would cost you net £1080 a month so you would gain 40% on every payment from day one
    >>> Ok, that sounds better.

    If you are running a Company your company could fund £1800 tax free to you and Tax free for the company
    >>> Ok, this sounds good.

    All the funds would be ring-fenced from creditors and all uk Taxes
    >>> I hope so!

    You can also take 25% tax free ie £300,000
    >>> Sounds good.

    You can also pass down the pension to a spouse keeping tax benefits and pensions can help with IHT planning
    >>> I could also '7 year rule' the properties to children.

    If you were paying net pension contributions  it would cost you £272,160

    so you would have turned 276k into 1.2m with the help of the tax man

    >>> This sounds good, but at what age could I start drawing down?

    You could also invest via a SASS and if you wanted to you could buy commercial property

    >>> sounds interesting - finding the right commercial property is on my current to do list.

    Pensions are strong for the right investor

    We have all see the changes in the PRS is it not wise to have a plan B with a pension to run along side your BTL business

    you can dabble with both

    >>> Thanks for your thoughts DL.

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    If you can get a DB pension through your work it is definitely worth it, particularly the public sector ones.

    If you are employed and your employer will match your contributions a pension is also definitely worth it.

    If you earn money in your own name and are a higher rate tax payer a pension is most likely worth it.

    If your income is below the personnal allowance and you are between about 54 and 75 contributing to a pension is definitely worth it.

    Even for someone only getting 20% tax relief (or 19% if done from a company) there are advantages to using a pension.

    • There are far more pensioners than landlords so politicians treat pensions carefully
    • A modern pension is outside your estate for IHT purposes
    • Pensions are if handled correctly a bit less risky
    • Pensions are taxed as income, but with 25% tax free. Rents in you own name are subject to S24 and done through a company are likely to incur multiple taxes before you can spend them. (Yes you can repay a loan from post corporation tax company income but enventually you would have repaid it all.).
    • Pensions get tax free growth (OK not really an issue if you are 59, but great if you are 29).




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    If I understand this correctly then I could pay £32k into a pension for myself and my wife via our company as long as I give us a £40k wage each and then £32k goes in as salary sacrifice.  Government then makes this up to £40k each and,as I am a higher rate tax payer, I get further rebate against my other taxes (BTL income)?

    As I am salary sacrificing then I would have no NIC or tax to pay on the £40k wage each and my company would also pay no NIC or corporation tax on that £80k?

    Sorry for the very basic questions but this is very new to me and I will take specialist advice before proceeding but just want to make sure my basic understanding is correct first

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    If your investing money from a company to your director pension you don't need a salary

    Your company pays the money in and the company wont pay corporation tax

    and you have no tax liability

    The max the company can pay is 40k a year


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    Learn Change and Adapt ?????


    You might find this vid helpfull

    Directors Pensions

    https://www.youtube.com/watch?v=QbDLz6P7CRU

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    Learn Change and Adapt ?????

    Thanks DL that was very helpful.  Company paying into my and my wife's pension seems the way to go.  Now I just need to do a bit of research whether to SIPP or SASS.  I like the idea that a SASS can buy commercial property and even take a mortgage.

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    You have forgotten the most important thing on the side of the shares and thats the dividend. When reinvested, over the long term, it increases returns made by 200-300% depending on wht market was invested in. In the same way that yields provide the bulk of return over the long term with property, they do the same with shares when reinvested. The other thing to remember with shares is that when investing for a pension, you tend to pick bluechip indices and within in that bluechip shares, so you will glance at these maybe once a quarter or every half year, given the opportunity to do something else with your time. Some property allows you almost similar amounts of free time without resulting to outsourcing management, but the majority requires weekly if not day to day running. Prime and secondary commercial is about as near as you are going to get to hands off.

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