Forgive my scepticism, I can only talk from past experience, you see I’ve got a share portfolio which I’m looking to for a pension, I’ve had this for 7 years and rather than make me any money, it’s actually fallen 3% in value.
The news is full of programmes investigating the current financial crisis; no avenue of investment seems to be safe.
Panorama recently investigated the vast fees and commissions some pension companies take from their clients, in one case a lady’s net return over 21 years was just 3%…it would have been 4% if she had not been paying various charges!
Now I’m sure that there are other pensions that would return her a larger sum but as she pointed out, how do you know which are any good?
Well the answer is, you really don’t…
For years I have tried to educate clients as to the benefits of investing in property as your pension. Not only do you benefit from any rental returns after mortgage payments but you will also over a number of years, benefit from capital growth.
It has been widely documented that property prices have taken a tumble in many locations, however if you buy smart and at a good price you massively reduce your risk.
The average pension pot in the UK is around £33,000; now for many of you it may not be too late to do something about this.
Below I will show you a simple way to make your money work for you in property.
Let’s take a 35 year old male that wants to retire at 55.
- Purchase a 1 bed apartment for £150,000. (Multiple locations across the south coast)
- Deposit needed £30,000 (20%)
- *Repayment Mortgage over 20 years = £735 pcm (4% interest rate)
- Rent PCM = £750 pcm (average for this price and location)
- Management Cost £75 pcm (10%)
- Additional payments = £60 pcm.
*Remember this is a repayment mortgage, not interest only, the long term goal is to pay this mortgage off over 20 years.
If you look at the £60 as your pension payments, in 20 years time you will have a pension pot worth £150,000, not taking into account any growth; giving you a return of £750 pcm.
Now the chances are that there will be capital growth during this period, if we take it at just 5% per year, your property will be worth £397,995 in 20 years time.
Rental also historically increases over time, if we take 5% here as well, your £750 would be worth £1,990 pcm in 20 years.
When investing in stocks and shares, it is extremely hard to get an idea of what they will be worth come retirement time. Brokers and IFA’s will bombard you with figures, but for the most part it’s a shot in the dark.
One thing that not is historical data on property and rental growth, this can be proved, as can the UK’s desperate need for more property and the demand for rental property in certain areas.
Many of you probably own a house and have done for a number of years, cast your mind back 20 years and recall the re-sale and rental values then. See what I mean?
- £30,000 investment in property now
- £60 pcm top up
Should provide you with…
- An asset worth £397,995 in 20 years time
- Income of £1,990 per month.
Keep ploughing money into a product you’re not in control of and you probably don’t understand.
For information on how you can make your pension work best for you contact Fresh Invest on 01243 527327 or email email@example.com.
After watching the leader’s debate last night, one thing stuck in my mind, it wasn’t any particular party policy (at the moment it seems they all have flaws somewhere) it was… the poor old lady that is currently having to live on £59 per week as her state pension!
The thing that I find the worst about this is that, we all know that by putting our pension in the hands of the government, we are never truly in control. I, like many others, like to be in control of my finances and this is where I would like to make the case for the Self Invested Personal Pension (SIPP) known.
Not only do I like to know how much of a pension I will have to live on come retirement age, but I would also like to be able to increase this amount which will either mean me retiring earlier than originally planned or living a more prosperous retirement period. The only way you can truly take control is by utilising the money in the form of a SIPP. There are fantastic benefits available for people putting money into a SIPP such as attracting tax relief at your tax rate; this means that if someone is taxed at 40% the government will add 40% to any contributions they make towards their SIPP!
Another advantage to a SIPP is the ability to borrow up to the value of 50% of your SIPP to increase your buying power this means; if an investor has a pension value of £100,000 they can then borrow a further £50,000 against this, giving a purchasing power of £150,000.
I believe that the only real way to have a secure and happy retirement is to use a SIPP to invest in property, be it in the UK or Overseas. The returns available in our Cape Verde Investment for example, show that if an investor had a pension value of around £84,000 they could increase this figure to around the £300,000 mark in 10 years, and still have an apartment providing a net profit per year of £12,000! This is based on pessimistic figures, assuming that growth isn’t as good as it has proven to be over the past few years.
We think now is a fantastic time to invest in any property with your SIPP, especially those in Cape Verde; which is a real emerging country currently receiving 15% growth per annum and tourism increases of around 27.5% pa expected to top 1,000,000 per year by 2015.
With the recent drop in shares values, do you know the real value of your pension?
A combined state and private pension amounts to an average monthly income of just £500, so if you don’t want to live your retirement in poverty it’s time to do something about it!
The situation is down to many factors. Few people know exactly how much they need in their pension to achieve a comfortable standard of living.
Pension values have dropped by as much as 40% over the last 2 years, the result of the recession is that many people have not increased their contributions in order to offset this drop. In many cases they have actually scaled back in order to pay for important every day goods.
In order to draw the most basic of incomes we need to accumulate a fund of at least £184,704 which would provide a monthly income of roughly £1,000 gross.
Want to know what the average private pension size is at the moment….just £25,000! That will pay roughly £125 per month. Add state benefit of £90 per week and you have a monthly total of less than £500 gross to live on.
To give you an idea of how little this is, most individuals need a retirement income of two thirds of their pre retirement income after they retire. To calculate what you need take your current monthly income and times it by 0.75. More than £500 isn’t it!
If we take a basic income of £1,000 per month, so £12,000 per year, times this by 25 (the average amount of years we are currently living after retirement) that’s £300,000!
If you aren’t already investing in a pension or you have sat back and ignored this problem, perhaps now is the time to take note and do something about it?
To make up the deficit pension providers normally ask you to divide your age in half and invest that amount of your salary into your pension, so a 40 year old will be expected to invest 20% of his salary into a pension.
So what are your options?
We have already discounted stocks and shares, only the most high risk share dealing we enable you to obtain the funds you need by retirement.
The answer in my opinion is property.
By purchasing a property and putting it in your Sipp you will gain all the advantages of high capital growth and rental income and be able to do so without dipping into your existing savings or re-mortgaging any properties you own.
Our properties on Dunas Beach Resort start at just £82,000, you would need a pension value of about £55,000 to purchase it outright or alternatively you can use part of your pension and top up the rest via cash or a loan.
We have calculated that it would take just 10 years for the value of an £82,000 property at Dunas Beach to increase to over £300,000!
That’s on an initial investment of just £55,000.
This is based on very pessimistic figures including:
- A 10% increase in prices per annum (15% for the last 3 years)
- A room cost of €110 per day (currently €150)
- An occupancy rate of 68% (currently 95% in 5* hotels)
As you can see Dunas Beach offers an incredible opportunity to get the run on your current pension plan and boost it to more realistic figures!
Transferring your pension:
Many of you will have a few pensions with different companies and moving all of these into a SIPP can be a long term project. Our IFA can take care of that for you; all you need to do is fill in some information on your current pension plans and they do the rest!
When this is complete (average time is 6 weeks) you are free to purchase a unit of your choice dependent on money available.
For more information on funding your investment with a SIPP click here.
If you have a pension and are interested in seeing how this works, e-mail us for more information.
How many of us wish we could afford a holiday home abroad? Silly question? It’s probably all of us!
What puts you off?
2. Being able to let it out?
4. Flight times?
5. Guaranteed sunshine?
Well all may not be doom and gloom, there are a few overseas developers that have taken the step of building property that is packaged in such a way as to be affordable and relatively “hands off”.
Obviously the most important factor in purchasing an overseas property is price. Our most recent “fresh” investment is in Cape Verde, the units start from £72,000 and any prospective investor will need to find 35% deposit to purchase.
Where this development comes into its own is that you can release money from your existing home to fund the deposit or alternatively source a secured loan. The developer will then pay the interest on this loan for you until completion, at which time the interest will be added to your completion price.
An interesting point to note is that Cape Verde property has been increasing by 15% per annum over the last few years, even bucking the current financial crisis. If this continues you will have made 30% worth of profit on your investment before completion, as this is 2 years off. If you then want to secure a mortgage on your chosen unit, you can do so at 75% ltv of its valued price. Realistically you could find that you actually only need to find 5% deposit, as the other 30% will have been taken care of by the capital appreciation.
As far as letting the unit is concerned, you have the option of opting in or out of a rental pool, if you opt in, all management is taken care of, leaving you free to keep the profit. At the moment 5* hotels in cape verde are running at 95% occupancy, a recent study showed a 9.5% yield based on just a 65% occupancy. Best part, you get 5 weeks personal use per year! So now you have a holiday home that not only makes you significant profit each year but also only conceivably cost you £3,600!
Security? It’s a 5* resort so security will be of a maximum, their will be creche’s for your children and the entire community is gated. Flight times? if your from the UK your there in 5 hours, half the time of most Caribbean destinations! Guaranteed Sunshine? Yes, all year round dropping to 24 centigrade over Christmas! For more details of how we can source you a great investment contact Fresh Invest Ltd.
How safe is your pension? Is it something you think about often?…. Maybe it should be
Now, more than ever is the time to be thinking about a SIPP in Investment Property.
Did you know that for the first time in history the number of over 60 year olds in Britain is larger than the number of under 16′s? The reason for this is “The Post World War Two Baby Boom”
Between 1946 and 1964 there was a dramatic change in the planets demographics. There was suddenly a huge increase in the amount of under 16′s.
Average growth in the population aged over state pensionable age between 1981 and 2007 was less than 1% per year. Between 2006 and 2007 the growth rate was 2%! Source: ONS
Because of this the government is going to have a very large increase in state pension payouts.
State pensions are Index linked therefore as long as the economy is in deflation your pension is decreasing in size.
So the outlook is bleak for your pension? Now is the time to change this!
Invest in any of our overseas property to see long term capital gains and great rental yields!
For example: Our most recent overseas opportunity is Dunas Beach Resort in Cape Verde. Now I strongly believe that that this is one location not to be underestimated! In terms of capital appreciation you are likely to see at least a 15% rise per annum during the course of the first two years. With rental yields estimated at 9.4% (Pessimistic) this is a great place to invest.
Not only is Cape Verde receiving massive Foreign Direct Investments but demographically they have an extremely strong population with only 6.7% over the age of 65 this puts Cape Verde in a great position for economic growth.
To see our Blog on Cape Verde click here
To view details of all our overseas investment property click here