The Student Room Group

Reue's Pension FAQ

Scroll to see replies

Original post by Smack
The value of your property certainly can fall in that time. Currently property prices are kept artificially high due to the restrictions placed on the provision of new homes. If the market was opened up, enabling existing brownfield sites and new greenfield sites to be developed, the price of your property would fall. Supply and demand.


They would need to build double what they do now for a decade just to keep prices in the same place nevermind fall, it simply won't happen


Posted from TSR Mobile
Original post by Quady
£245 delivered was the buy it now, so it'll be £203 after discounts.

Does your dealer provide proof quality in original case with Royal Mint COA?
I'm guessing yours are pretty well circulated?

How'd you sell them back and at what price?


he puts a 10% spread if you have the receipt to prove they were bought from them
Brilliant thread. I think a reasonable level of pension savings from me would be 10% coupled with whatever tax and employer contributions. Assuming I can reach 30k and those contributions occur for 30 years then that's a pension of 90k plus the employer and tax contributions (and other assets and investments). The pensions calculator tells me it all adds up to a pitiful 200k ish.

Ideally I'd retire at 50 with around 30k per year post any tax but that's highly unrealistic and adds to an amount over a million.
(edited 8 years ago)
Reply 63
Original post by Rakas21

Ideally I'd retire at 50 with around 30k per year post any tax but that's highly unrealistic and adds to an amount over a million.


Why do you think you'd need that much?
Original post by Reue
Why do you think you'd need that much?


I'd still like to be accumulating wealth be it because I find finance interesting or to cement the future financial safety of grandchildren ECT..
Reply 65
Because in the first situation you're gaining £5 in the pension plus £69.92 take home.

In the second situation you're gaining £3.68 in the pension plus the £69.92.

You take home the same amount, however the difference is in how much goes into the pension.
(edited 8 years ago)
Great thread, still can't believe people are advocating BTL over pensions. Crazy talk
Reply 67
Original post by Hedgeman49
Great thread, still can't believe people are advocating BTL over pensions. Crazy talk


Agreed, especially with the recent tax changes for BTL mortgages.
Original post by Reue
Agreed, especially with the recent tax changes for BTL mortgages.



Hello, I wanted to ask a q.

Lets say a work at X firm and they offer a 5% contribution.


Lets say after 5 years of putting 5% in. I LEAVE the company
and now work at company Z.

In 2 more years X firm is BANKRUPT - what happens to my 5% contributions? Have those gone?
Reply 69
Original post by helpmekid
Hello, I wanted to ask a q.

Lets say a work at X firm and they offer a 5% contribution.


Lets say after 5 years of putting 5% in. I LEAVE the company
and now work at company Z.

In 2 more years X firm is BANKRUPT - what happens to my 5% contributions? Have those gone?


no, your defined contributions pensions are held by a pension provider independent from your company.
Original post by paul514
They would need to build double what they do now for a decade just to keep prices in the same place nevermind fall, it simply won't happen
Posted from TSR Mobile


They said that before the crash of 2008 as well. We lost £12k on the house we bought in 2008 and sold in 2013.

Even Sarah Beeny had to rebrand her program from Property Ladder to Property Snakes and Ladders.
Original post by Reue
no, your defined contributions pensions are held by a pension provider independent from your company.


I see


Wow! Thank you very much for the help on my qs and the lengthy time you took to explain it! I and other appreciate it.


One more quick and final question:
Assuming I am very pessimistic - after my employer pus e.g 5% in and matches my 5% then money is then held by a pension provider independent from your company

- What does that ^^^ provider do with the money? I assume invest it in shares?

If yes, is there a risk if they invest it in e.g OIL and now that has plummeted?

Thanks
Reply 72
Original post by helpmekid

One more quick and final question:
Assuming I am very pessimistic - after my employer pus e.g 5% in and matches my 5% then money is then held by a pension provider independent from your company

- What does that ^^^ provider do with the money? I assume invest it in shares?

If yes, is there a risk if they invest it in e.g OIL and now that has plummeted?

Thanks


They will invest it as you've instructed them to.

The default option is usually a good mix of different stocks, bonds and other investments.

I can't imagine any company pension scheme allowing you to invest it all entirely in a single market.
Original post by helpmekid
I see


Wow! Thank you very much for the help on my qs and the lengthy time you took to explain it! I and other appreciate it.


One more quick and final question:
Assuming I am very pessimistic - after my employer pus e.g 5% in and matches my 5% then money is then held by a pension provider independent from your company

- What does that ^^^ provider do with the money? I assume invest it in shares?

If yes, is there a risk if they invest it in e.g OIL and now that has plummeted?

Thanks


You can specify a specific risk appetite for the portfolio, generally a low-mid risk one as a default.

There could be some oil stocks in the portfolio but to invest everything in oil would be very high risk option so wouldn't happen in practice.
Reply 74
Original post by Hedgeman49
generally a low-mid risk one as a default.


I've found most default options to be much more mid-high risk. The thinking being that you'll usually start a pension when you're young which is exactly when you should be going for those higher risk investments.

Most default plans also do 5-10 years of life-styling to de-risk as you reach pension age.
Original post by Reue
I've found most default options to be much more mid-high risk. The thinking being that you'll usually start a pension when you're young which is exactly when you should be going for those higher risk investments.

Most default plans also do 5-10 years of life-styling to de-risk as you reach pension age.


Yes I noticed the risk taper later on. Makes sense
Reply 76
buuuump
Original post by Reue
buuuump


Not much has changed mate - gold medallions, bitcoin and buy-to-let all the way.

---

EDIT: Forgot to add Bitcoin, pardon my ignorance.
(edited 6 years ago)
Original post by ByEeek
They said that before the crash of 2008 as well. We lost £12k on the house we bought in 2008 and sold in 2013.

Even Sarah Beeny had to rebrand her program from Property Ladder to Property Snakes and Ladders.


I am most familiar with [of course], the real estate market on this side of the pond. From about 1950 to 1975-1980, the average* house anywhere in the US, sold for about 3.5 times the average* salary in whatever area it was located in. In Nevada, most ppl don't make much money, so houses were relatively cheap. On Madison Avenue in NYC, ppl make a lot of money, so flats were expensive. Overall, though - the 3x to 3.5x ratio seemed to hold pretty well. After the early '80s, this seemed to sort of fall apart. Now, a house that i paid $37,800 for in 1971, is typically being 'listed' for something over $300,000. If you apply the 'double every 10 years' criteria, which used to hold for securities and other investments back in the '70s, to 2010, this would result in a multiplier of "8". Multiplying $37k by 8, yields about $296k, so at first blush, it seems to work. The problem is, that virtually nobody has received a raise (in real numbers) since the early 1980s.

When i went to work for the Federal Government in 1969, they hired me at $18,800 as an electrical engineer. That wasn't bad pay then: pump petrol was about $0.20 a gallon a loaf of 'day-old' bread (3 lb), was $0.25 on the 'knock down' shelf at the supermarket, and you could eat lunch in a transport caffe' for under $3 (including a cuppa). Now, the same lunch will cost you $8 to $12, petrol is about $3.30/gallon [varies with region], and the flat that you paid $820 a month for in 1971, is now costing you $2500 to $3500, depending upon neighbourhood. When i left the Fed Govt, i was making about $65,000. With my master's degree [in EE], and experience, i should get between $100,000 and $125,000 today. This is NOT typical of the average worker, because engineers (at least here), are in short supply - particularly those who have had NO criminal convictions and no drug involvement. In 1969, if they turned up that you had TRIED pot [on a polygraph or through verbal interviews], you could kiss your employment chances good-bye. Today, it seems that if you have never been a high level drug dealer in NYC, nobody cares. Baffling!!

With houses 'selling' for $300k, assuming you have a 20% down payment (say 60k), this leaves $240k to finance. Even if you get a 5% loan, this gives you $12k for an 'interest only loan'. Your PITI [principle, interest, taxes and insurance] monthly payment would have to be in the $1300 - 1400 / month range. The taxes on this house (in the D.C. area - northern Virginia) would be about $5600.00 a year, or $466.66/month. Neglecting the insurance you would have to carry, to keep the lender happy, we will add the tax burden to the loan payment. An average loan rate on that property would run about $1300 - 1400 per month. plus taxes, would be about $1866.66/month. Now, lets assume that the husband's income is $50,000. This would be a 'lower mid-level' engineer or software developer. Bearing in mind that, with an average tax burden (local and state + federal), you get to keep about half of your gross salary - so your monthly income would be the gross annual salary/24. The "24" derives of half the monthly salary. With the $50k gross income, this gives you about $2083.33 a month. Subtracting your PITI house payment, you are left with about $216.66 a month. This is to pay for commuting petrol, clothes, food, utilities, and everything else.

Clearly, one person at this income level, cannot 'float' a house these days. In 1971, one person could - because i did. Obviously, for the average working person, things have gotten worse. They must be even worse elsewhere, because 'illegals' keep flocking in here to live and work. Now, certainly, you have 10 or 20 of them living in one house. THAT way, they can 'make it', but not in a conventional life style. Another approach would be to rent out the garage or spare bedroom. I see a lot of that too.

When interest rates go up - as they certainly will have to, i suspect that we may see a wave of loan defaults and foreclosures, as people discover that they can't keep the plates balanced on the wooden wands any more. Note that this is assuming $50k for the first resident's salary. This is pretty high, when you consider that in this neighbourhood, many of the residents are plumbers or construction workers. Often, the wife drives a school bus. She is probably making less than half of the $50k. If you had two professionals in one household - say a physician and an engineer, their combined incomes would probably be over $150k to 200k. But then, of course, they would not be living in this neighbourhood.

Cheers.
Original post by Rabbit2
I am most familiar with [of course], the real estate market on this side of the pond. From about 1950 to 1975-1980, the average* house anywhere in the US, sold for about 3.5 times the average* salary in whatever area it was located in. In Nevada, most ppl don't make much money, so houses were relatively cheap. On Madison Avenue in NYC, ppl make a lot of money, so flats were expensive. Overall, though - the 3x to 3.5x ratio seemed to hold pretty well. After the early '80s, this seemed to sort of fall apart. Now, a house that i paid $37,800 for in 1971, is typically being 'listed' for something over $300,000. If you apply the 'double every 10 years' criteria, which used to hold for securities and other investments back in the '70s, to 2010, this would result in a multiplier of "8". Multiplying $37k by 8, yields about $296k, so at first blush, it seems to work. The problem is, that virtually nobody has received a raise (in real numbers) since the early 1980s.

When i went to work for the Federal Government in 1969, they hired me at $18,800 as an electrical engineer. That wasn't bad pay then: pump petrol was about $0.20 a gallon a loaf of 'day-old' bread (3 lb), was $0.25 on the 'knock down' shelf at the supermarket, and you could eat lunch in a transport caffe' for under $3 (including a cuppa). Now, the same lunch will cost you $8 to $12, petrol is about $3.30/gallon [varies with region], and the flat that you paid $820 a month for in 1971, is now costing you $2500 to $3500, depending upon neighbourhood. When i left the Fed Govt, i was making about $65,000. With my master's degree [in EE], and experience, i should get between $100,000 and $125,000 today. This is NOT typical of the average worker, because engineers (at least here), are in short supply - particularly those who have had NO criminal convictions and no drug involvement. In 1969, if they turned up that you had TRIED pot [on a polygraph or through verbal interviews], you could kiss your employment chances good-bye. Today, it seems that if you have never been a high level drug dealer in NYC, nobody cares. Baffling!!

With houses 'selling' for $300k, assuming you have a 20% down payment (say 60k), this leaves $240k to finance. Even if you get a 5% loan, this gives you $12k for an 'interest only loan'. Your PITI [principle, interest, taxes and insurance] monthly payment would have to be in the $1300 - 1400 / month range. The taxes on this house (in the D.C. area - northern Virginia) would be about $5600.00 a year, or $466.66/month. Neglecting the insurance you would have to carry, to keep the lender happy, we will add the tax burden to the loan payment. An average loan rate on that property would run about $1300 - 1400 per month. plus taxes, would be about $1866.66/month. Now, lets assume that the husband's income is $50,000. This would be a 'lower mid-level' engineer or software developer. Bearing in mind that, with an average tax burden (local and state + federal), you get to keep about half of your gross salary - so your monthly income would be the gross annual salary/24. The "24" derives of half the monthly salary. With the $50k gross income, this gives you about $2083.33 a month. Subtracting your PITI house payment, you are left with about $216.66 a month. This is to pay for commuting petrol, clothes, food, utilities, and everything else.

Clearly, one person at this income level, cannot 'float' a house these days. In 1971, one person could - because i did. Obviously, for the average working person, things have gotten worse. They must be even worse elsewhere, because 'illegals' keep flocking in here to live and work. Now, certainly, you have 10 or 20 of them living in one house. THAT way, they can 'make it', but not in a conventional life style. Another approach would be to rent out the garage or spare bedroom. I see a lot of that too.

When interest rates go up - as they certainly will have to, i suspect that we may see a wave of loan defaults and foreclosures, as people discover that they can't keep the plates balanced on the wooden wands any more. Note that this is assuming $50k for the first resident's salary. This is pretty high, when you consider that in this neighbourhood, many of the residents are plumbers or construction workers. Often, the wife drives a school bus. She is probably making less than half of the $50k. If you had two professionals in one household - say a physician and an engineer, their combined incomes would probably be over $150k to 200k. But then, of course, they would not be living in this neighbourhood.

Cheers.


Your analysis is spot on. All that has happened in the last 20 years or so is that the prices of houses has adjusted to take into consideration two people's incomes rather than one. Thirty years ago, the second person's income didn't count so house prices were reflected in that accordingly. In the UK a chronic lack of supply has helped push prices even higher with buy-to-letters and well off couples getting first dibs. Things are now starting to stagnate since wage growth has been largely flat over the last few years.

Quick Reply