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Pension or Property?

I have seen the topics and features on LM regarding this subject but I'm still confused... My pension pot is almost non existent, I am 38, self employed and have only been paying in to a personal pension since 2008 (£160 per month + the odd lump as and when I can afford it). I have some Isa's and a stocks and shares Isa totalling around £30000 that will be available to me next March. Question is, what do I do with it? My primary aim is to secure a better income in my retirement. My love of fast cars and gadgets means that the money needs to be somewhere that I can't be tempted to 'dip' into it! Any tips or ideas would be greatly appreciated. Paul


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Paul Pensions and Property are both long-term investments, so should steer you away from the fast cars. Once money is in a pension, it cannot currently be touched before age 55 and maybe by then it will be higher since it has historically been based on the Male State Pension Age (M SPA - 10). I would seriously consider if there are any possibilities of lifestyle changes first. (Partners/families spring to mind) Pensions can be expensive so consider whether the tax advantages would benefit you. The 25% Tax-free cash is an obvious one which might roughly cancel out the higher charges. You would go into profit if your highest tax rate in retirement is likely to be lower than your current highest rate. If not, fully utilise your ISA allowance first (including the Stocks & Shares allowance). ISAs are much more flexible. You could get into property that way. Mike

Many thanks Mike, I'll be making a judgement when my Isa is available to me next year, I may re-invest the money and sit on it until I can afford a bigger deposit. Spoken to my bank today and learned the set up fees for buy to let are horrendous! Paul

Why buy to let ... are you living somewhere for free ... having your own property to live in will benefit you more initially from rental costs ... when you've done that for a few years you'll have more equity (if the prices don't go down and you buy a place you can cheaply maintain) and can then think about other income strategies like buy to let.

I am married, have two grown up kids now. Before the children came along, my wife and I decided to buy a house - most people did in then, and most would like to now, but it's much more difficult these days. Our main premise supporting investment in property, was simply the fact that if we owned our own house by the time we retired, we would benefit by not needing to pay rent. Yes, it is a very long-term investment, but whatever happens to property prices, we will always have somewhere to live - rent free.

I'd be interested to know what the buy to let set up fees are? The Value of rents vs. low rate mortgages mean this is a profitable use of money at the moment. I wouldn't buy new though. Somewhere with good transport links and access to shops etc will always command a good rent. Manage it yourself (needs to be local of course) but befriend a local estate agent to find and vet tenants (involves a fee, but this is a one-off fee).

I should have mentioned that I am a property owner, have approx £100'000 equity and currently utilising my savings / isa's with an offset mortgage that seems to work well. A recent meeting with the woolwich mortgage adviser has shown me that buy to let may not be for me just yet. In response to jillyb59, I have been told that the lowest set up fees for a buy to let mortgage would be £1500 and some lenders considerably more, couple this with them needing a minimum 25% deposit and a typical 2 bedroom flat in my area (Mid Sussex) costing £150'000 upwards then I'm left having to put a bit more away before I can consider doing this comfortably. Does anyone have any thoughts on the pros / cons of buying garages as investments? There are a couple advertised locally for around £10000 each in reasonable locations and the markets currently allows for rental of up to £60 per month - and no boilers to go wrong!... Paul

If we ever get a decent Labour government perhaps we could see the private rented sector brought back under some reasonable control as the old Rent Acts did. That would set BTL on the proer footing . I believe that it is a used as a surrogate for proper investment .

Have you thought about buying an industrial unit? As for saving, I would buy "The Naked Trader" by Robbie Burns and study it thoroughly, open a joint trading account with your Wife ( twice the CGT allowance ) and buy a load of OCG shares, then I would open a share dealing ISA and follow Mr. Burns avidly. Research your shares properly and don't get sucked into the penny shares game. Oxford Catalysts (OCG) has a great future. No guarantees of course, but you will probably make enough to retire early.

Always up for a good read, however I'm not much of a gambler and although I know all investments have the potential to go up and down I'd probably opt for a more modest return in the pursuit of being able to sleep at night. By industrial unit are you talking shops or lock up units? Many thanks for the advice Paul

Unless you know the property market well, you would be better letting the experts do it for you via a property trust (as an ISA?). Mike

Industrial units that you would find on an industrial estate. They do come up quite often, but you would need to be sure that they are in an up and coming area and that the units around them are occupied. Shares may seem like a gamble, but once you have a good understanding of what's going on you can weigh the odds in your favour. Just for the hell of it, imagine that you have bought £5000 worth of OCG shares, that's about 3500 of them, and keep an eye on them and see what happens to them over the next six months, It might change your mind. Good luck with what ever you decide to do.

My first tip would be to NEVER listen to the share pump and dumpers like Ciscokid. Avoid OCG at ALL costs!

My advice to you Severian is to pretend that you have bought 3500 shares in Oxford Catalysts (OCG), watch them for six months, and then post me an apology, because if you had taken the trouble to research OCG before posting your uneducated drivel you would know that I am not a pumper and dumper and that OCG has a very bright future. Check out Saturday's Daily mail, page 100, market report by Geoff Foster, column three :- " It was blue skies all the way for shares of OXFORD CATALYSTS. The modular gas-to-liquids technology innovator, soared 32.25p to a 52 week peak of 146p after several significant milestones were reached......." Pumpers and Dumpers usually promote micro cap penny shares around the 1p mark . Hoblands asked for sensible advice and I have given it. If you've got any guts at all Severian you will take a look at OCG and then post me an apology. Bye the way, I have 15000 OCG shares and I'm sitting on a profit of £9k. Like I need to pump and dump!!

@theciscokid ... I guess it was more the specific share being touted rather than the concept ... the fact you've repeated the name many times is also a bit suspicious ... and doing something very risky just because one share has worked is not great advice ... not everyone has the time to sit watching the market tickers every minute and pull out at the right moment before that 9K turns negative.

Oldhenry wrote: [I] If we ever get a decent Labour government perhaps we could see the private rented sector brought back under some reasonable control as the old Rent Acts did. That would set BTL on the proer footing . I believe that it is a used as a surrogate for proper investment [/I] Sorry, Henry. This is what comes when you spend years filling your head with commie claptrap. BTL [I] is [/I] an example of proper investment. But if you are a commie, it will not look to you like an investment because the state is not involved. We will not get a decent government of any type so long as we have the career politician. They will promise anything just to get elected, and people are stuck-on stupid and will vote for it. As part of the economic cycle, the only decent government the UK will be due for is a military [I]junta.[/I]

As a long term dividend income investor I prefer low-cost, self-select, stocks and shares ISA with high quality dividend paying companies bought when they were historically undervalued; using dividends to re-invest in similar (than) historically undervalued high quality dividend paying companies able to maintain and increase their dividends (preferably above inflation, each and every year. Once such a company hits historical overvaluation levels, as per our investment methodology, sell and re-invest in in similar (than) historically undervalued high quality dividend paying companies able to maintain and increase their dividends (preferably above inflation, each and every year., etc, etc Repeat this process for as long as possible and start drawing a tax free income once in retirement