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To Let or To Pru?

Discussion in 'Retirement' started by Twadugs, Jan 6, 2016.

  1. Twadugs

    Twadugs New commenter

    I am planning to retire a year early so will have a small reduction in my teacher pension benefits.
    I paid into Pru AVCs over a period of about 8 years. My choices would be -
    a) Cash in the AVC total (avoiding 40% tax by staggering withdrawls), add it to my lump sump and purchase a buy-to-let property.
    b) Keep the AVC investment with the PRU (around £1600 per annum).
    If I decide on plan b) how best can I reinvest the lump sum?
     
  2. eljefeb90

    eljefeb90 Senior commenter

    I've just retired but I'm no expert, but I know that 25% of the AVC pot can be taken tax free, with 75% liable for tax (at 20% if you stagger it correctly). Interest rates for savers are abysmal at the moment, the FTSE fell by 5% in 2015 and hasn't buy-to -let just been hit by additional tax?

    It all depends on whether you can cope on your pension and what your attitude to risk is. in these times of low/no inflation chasing massive returns looks like you'll need to take big risks and I , for one, have stuck to rock-solid investments and will be using some of the AVC money to do home improvements/maintenance (as well as going on several holidays!).
     
  3. lindenlea

    lindenlea Star commenter

    I took the 25% tax free lump sum and invested the rest in an annuity. I know everyone decries annuities but i get about £140 / month and I plan to live a long time. I had only had my AVC for a few years like you.
    A buy to let is a good investment if you can be bothered to be a landlord ( which I couldn't) but remember stamp duty will be 3% more for buy to lets after the end of March so a bigger initial outlay than currently.
    I used some of my lump sum - inc. the one from the AVC - to invest in a flat for my son. it was the best thing i ever did.
    You can invest in stocks and shares and seek out those that pay decent dividends even when growth is not great. Read Motley Fool for investment advice and you can do it yourself to minimise fees.
    Keeping some in cash deposits with minimal interest rates is OK while inflation rates are low.
    Spend some or give it away to someone who needs it - why not?
     
    install likes this.
  4. sci

    sci New commenter

    Given that there is a case going to court to challenge the government. It is trying to stop government charging tax on the whole of a buy to let income rather than (just) the profit. This will make the whole letting scenario much less profitable. I would not suggest getting involved in buy to let for a year or so until this is settled.
     
  5. jacob

    jacob Lead commenter

    Have none of you been following the economy? best thing to do would be get hold of it in hard cash and shove it under the bed.
     
  6. Yoda-

    Yoda- Lead commenter

    Your first choice a) assumes you can stagger your withdrawals from your AVC. You may be disappointed by the PRU.

    How to invest your 25% lump sum from your the AVC which is part of your plan b) depends on your overall financial position and attitude to risk.

    It is worth considering the need for an emergency fund to cover unexpected costs as you will have a smaller income from your pension, than you've been used to in your working life. Emergencies will probably need to come out of savings rather than pension income.

    As you will be relatively young, safe saving deposit investments such as cash ISAs may well not do as well as equities over the long term. A small exposure to equities may make some sense. Perhaps consider a mixture of cash and equity investments in ISAs.

    I hope my thoughts are of some help. It is not advice. I am not qualified to give advice and suggest that you get qualified advice should you feel you need to do so. I am however in a similar position to yourself. I look forward to following this thread.
     
  7. Twadugs

    Twadugs New commenter

    Yoda said-
    Your first choice a) assumes you can stagger your withdrawals from your AVC. You may be disappointed by the PRU.
    How to invest your 25% lump sum from your the AVC which is part of your plan b) depends on your overall financial position and attitude to risk.


    I checked with the PRU and they confirmed that I could stagger my withdrawls in order to avoid 40% tax.
    Also, the lump sum I was referring to was the one from the Scottish Teachers Pension (superannuation) which is tax-free, not an AVC lump sum.
    Basically I would be looking to gather £100,000 in order to purchase a buy-to-let without having to take out a mortgage. And I do realise there is going to be higher stamp duty on properties bought later this year, however I have already factored in the extra costs involved.

    I just need to work out is if it is too much of a risk!

     
  8. lindenlea

    lindenlea Star commenter

    Are you happy to be a landlord/ If you have no worries about that then in purely financial terms it would probably be a good investment while you don't need the money. Remember your income will be taxed and your capital gain when you sell.
     
  9. Yoda-

    Yoda- Lead commenter

    Good news about staggering the AVC if you cash it in. This was not my understanding, but if you've talked to them its good news for me as well! Would you need paid advice or is the governments Pension Wise consultation enough?
     
  10. Twadugs

    Twadugs New commenter

    Good news about staggering the AVC if you cash it in. This was not my understanding, but if you've talked to them its good news for me as well! Would you need paid advice or is the governments Pension Wise consultation enough?

    Please don't act on what I interepret as being advice from the Pru, seek your own council on that one.
     
  11. Yoda-

    Yoda- Lead commenter

    Message understood. I haven't talked to the Pru yet. Probably will Feb half term. Will post what I find out....
     
  12. Sundaytrekker

    Sundaytrekker Star commenter

    I will be interested in the answer to that. I am wondering whether to keep my avcs with the Pru and withdraw them gradually or transfer them to someone else. I don't want an annuity now that we can get at the capital instead.

    I don't fancy being a landlord. I'd rather help my kids with their next house move.
     
    install, lindenlea and Yoda- like this.
  13. snowstorm

    snowstorm New commenter

    Watching this thread too :)
     
  14. Dunteachin

    Dunteachin Star commenter

    Always shop around! I had AVCs with the Pru and when I decided to take them, I got quotes from 3 other companies and the Pru were NOT giving the best payout.
    Read all the info they give you - they are obliged to tell you that you may get a better deal elsewhere. It pays to do your homework.
     
    snowstorm likes this.
  15. maud1901

    maud1901 New commenter

    Hi and so sorry that this post is unrelated to the Pru.

    Is anyone out there able to help me in starting a new thread, please?

    I cannot for the life of me find the 'New thread' tab on the screen.
     
  16. lindenlea

    lindenlea Star commenter

    Go back to the title page - Retirement. The new thread button is on the right.
     
  17. maud1901

    maud1901 New commenter

    lovely, and thank you.

    So does this mean i can write about anything here or does it need to be retirement related?
     
  18. Informant

    Informant New commenter

    Retirement topics are expected in the Retirement forum group. I'm not sure how often these are read, but you can see from the posting dates it's one of the 'less active' TES Community groups.

    Incidentally anyone intending to stagger withdrawals (drawdown) from Pru may find there is an overhead due to admin fees.
     

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