{"id":1254,"date":"2014-04-22T14:57:51","date_gmt":"2014-04-22T14:57:51","guid":{"rendered":"http:\/\/bgfs2018.wpengine.com\/?p=1254"},"modified":"2014-04-22T14:57:51","modified_gmt":"2014-04-22T14:57:51","slug":"from-pensions-to-property","status":"publish","type":"post","link":"https:\/\/www.buckinghamgate.co.uk\/blog\/from-pensions-to-property\/","title":{"rendered":"From Pensions To Property"},"content":{"rendered":"

Following on from my post last week<\/a> about taking the benefits from your pension plan as cash, I would also like to touch on the growing number of media outlets that are suggesting that people use their pension pot to purchase a buy to let property.<\/p>\n

In the same format as last week, I have run a couple of very simple examples to show the tax implications of drawing money out of a pension in order to fund property purchase. For simplicity I am assuming that our subject has \u00a3100,000 in a pension pot and is considering purchasing a buy to let property that would have a 5% rental yield after expenses. We will also assume that the pension fund could generate a 5% return after fees. We will assume our subject has \u00a320,000 per annum of other lifetime income.<\/p>\n

 <\/p>\n

Option 1 – Take all of the pension pot as cash and purchase a buy to let property<\/span><\/p>\n

\u00a3100,000 pension pot could be taken as:<\/p>\n

\u00a325,000 Tax free<\/p>\n

\u00a375,000 will be subject to income tax as follows<\/p>\n

\u00a321,865 @ 20% = \u00a34373 tax<\/p>\n

\u00a353,135 @ 40% = \u00a321,254 tax<\/p>\n

The client would receive \u00a374,373 in cash and pay \u00a325,627 in tax<\/p>\n

\u00a374,373 is then invested in a buy to let property and a 5% income is drawn from the property.<\/p>\n

The income would be \u00a33719 per annum ( this would reduce to \u00a32975 after tax)<\/p>\n

 <\/p>\n

Option 2 – Leave the money invested and draw an income from the pension<\/span><\/p>\n

\u00a325,000 could still be drawn from the pension tax free (however this money is no longer needed to purchase a property and can be used as income)<\/p>\n

\u00a325,000 will provide income for 8.4 years based on \u00a32975 per annum (as the property would produce above)<\/p>\n

\u00a375,000 remains invested and earns 5% per annum return on average for the 8.4 years mentioned above.<\/p>\n

The \u00a375,000 is now worth \u00a3111,793 (approximately).<\/p>\n

5% income on this amount is \u00a35589 per annum which would be \u00a34471 after tax.<\/p>\n

The client could also choose to draw larger amounts from the capital as well if required.<\/p>\n

 <\/p>\n

While property can form an important part of a retirement portfolio it would be wise to consider the tax consequences before taking the plunge!<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Following on from my post last week about taking the benefits from your pension plan as cash, I would also like to touch on the growing number of media outlets that are suggesting that people use their pension pot to purchase a buy to let property. In the same format as last week, I have… Read more »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,2,3],"tags":[],"class_list":["post-1254","post","type-post","status-publish","format-standard","hentry","category-budget","category-pensions","category-taxation","wp-sticky"],"_links":{"self":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts\/1254","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=1254"}],"version-history":[{"count":0,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/posts\/1254\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=1254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=1254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.buckinghamgate.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=1254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}