Pension or property

Red Fred · Mar 7, 2021

Dave6170 said:
I assume alot of people live off the farm till the day they die? Hardly know any farmers who have fully retired.

A friend's dad had 5 daughters and was an excellent traditional farmer, but he wouldn't have any of them working on the farm as he knew himself about the family battles that ensue. Instead he let everyone know all along that he would retire on the button at 65, and then treat everyone exactly the same, and that is what he did. He spent all his retirement keeping his mind sharp with his investing and now in his 90s, he says it worked out best for everyone. Trouble is, none of us know how long we have, but in his case, he and his wife both enjoyed long happy retirement in their modest bungalow with big garden on the edge of town.

DrWazzock · Mar 7, 2021

I’m inclined to put any spare cash in stocks and shares ISAs which haven’t faired too badly. I started a pension too late to be really worth anything but do like seeing the tax come back.
The Mrs just has to keep me off the Firby website so I am not tempted by another “project” though the way second kit has gone up that not be such a bad idea.
Money sat in a cash savings account isn’t good unless you need quick access for an emergency. I did employ a financial adviser who was a bit shocked at the smallness of my income. I did wonder if he was a waste of money but I have had a decent return even through the pandemic so maybe he’s done some good.
I have built a couple of sheds here with spare cash but they are in the “partnership”. Not sure I’ll ever see the money back but they make my daily life so much easier.
I’d say keep working if you can. I think we are going to have to work for longer than many of the last generation.

Welly Warmer · Mar 7, 2021

farmerm said:
Bloody rental properties, always something.. tenants central heating pump failed friday evening, cant get my plumber until Monday Legally I don't think I am allowed to wire in a new one without some electrical qualification

You are correct, rental property is a business which requires constant upkeep and expenditure to enable a return. A bit late now, I know but, if you are replacing like with like, wiring into a spur and you are competent then I see no issue but do your own due diligence.
The writing is not yet on the wall, but now that residential landlords have been hung out to dry by the tories during covid, its not going to get better (and frankly its been too good for too long)

Highland Mule · Mar 7, 2021

SilliamWhale said:
I figured to be satisifed with retirement you need a pension pot of about £300k.

I wouldn’t want to live on that little a pot. What length of retirement and yearly income would you expect for your £300k? Annuity rates are low (3-5%?) at the moment, so maybe £1k/month if you’re lucky? Take off council tax, household bills and the likes and it doesn’t leave much for living.

Highland Mule · Mar 7, 2021

DrWazzock said:
I’m inclined to put any spare cash in stocks and shares ISAs which haven’t faired too badly. I started a pension too late to be really worth anything but do like seeing the tax come back.

My mate is actively spending down his ISAs on living expenses so he can maximise his pension contributions. Figures that’s a huge tax advantage for him at his age.

Red Fred · Mar 7, 2021

Another option is to find a younger wife who has a good job.

Brisel · Mar 7, 2021

Dave6170 said:
I assume alot of people live off the farm till the day they die? Hardly know any farmers who have fully retired.

This is a big problem looming in farming. There are too many who won't have enough savings to sustain them in retirement and hand the farm down intact. There's a generation of older farmers who viewed the farm as their pension & the only way to generate the cash is to sell up. A mate of mine has worked the family farm for decades for a minimal wage with the promise that it would be his but his parents have no pension built up other than the equity in the farm. He's in his forties with only a very small pension of his own, a wife & child.

farmerdan7618 · Mar 7, 2021

It's a huge issue, although not impossible to solve.

Should always pay a market rate wage for family labour, if the cash isn't around then show it in the accounts as an increasing loan from them.

When the time comes, the loan can be transferred to equity and everyone knows what they have worked for.

When the older generation wish to retire, younger generation should be able to finance the older generations equity, then both need to come to an agreement about the increased value of land and how much is required to buy out if the older generation needs more for retirement.

It's not the most tax efficient in the short term, but everyone knows what they are worth. May not be necessary in some families, but should have been done in other.

Asking to be kept by the next generation is likely to cause problems, as nobody knows how much they need to find.

Two Tone · Mar 7, 2021

Michael Caine once said "I've been rich and I've been poor. Rich is best. Not a lot of people know that!"

Pensions aside, I am terrified of retiring and having nothing to do! I love what I do and health permitting, do not ever wish to fully retire.

It's not just the physical side of keeping one's health, but keeping the brain active. Which to my mind is even more important.

teslacoils · Mar 7, 2021

farmerdan7618 said:
Asking to be kept by the next generation is likely to cause problems, as nobody knows how much they need to find.

I don't think it unreasonable that after raising two children, probably helping them with university, childcare etc, that they ought be of some assistance in my old age.

teslacoils · Mar 7, 2021

Highland Mule said:
Find more. Live more frugally now or get a way to increase your earnings. £100/month will not give you much of a retirement.

Can't live much more frugally. Not entirely sure how to boost earnings.

Highland Mule · Mar 7, 2021

teslacoils said:
I don't think it unreasonable that after raising two children, probably helping them with university, childcare etc, that they ought be of some assistance in my old age.

If you’re lucky they might even buy you a (one way) holiday flight to Zurich

.

Highland Mule · Mar 7, 2021

teslacoils said:
Can't live much more frugally. Not entirely sure how to boost earnings.

I don’t know your circumstances, so can’t comment - but as a rule of thumb you should:

Take the age you start your pension and halve it. Then put this % of your pre-tax salary into your pension each year until you retire.

Nearly · Mar 7, 2021

When we stopped (for 2nd time) being tied to a milking parlour in 2008 I feel that I effectively retired.

I though suckler cows and arable was retirement?

I have noticed that the calves are getting faster this calving time.

teslacoils · Mar 7, 2021

Highland Mule said:
I don’t know your circumstances, so can’t comment - but as a rule of thumb you should:

Take the age you start your pension and halve it. Then put this % of your pre-tax salary into your pension each year until you retire.

Im paying off the mortgage. That's as much as I can manage. Hoping I can find an off farm job as soon as my youngest gets to secondary school in September. Any off farm income would be "spare" and investable. But currently....well it's a bit tight.

robs1 · Mar 7, 2021

Highland Mule said:
Pension or property?

My £100k sitting in the business can be turned into £60k-ish cash to put deposit down on a house which will need further mortgage debt (not tax deductible) but return a rent (taxable) every month from now on - wether I want the income (and taxation) or not. The capital might grow though, and be an asset to pass on to Jnr, but with an IHT bill.

My £100k could be turned into £100k of pension fund, with me getting further tax relief on it too - now. In a few years I’ll be able to take 25% of it tax free, and can chose wether to let the rest be drawn down or keep growing as my circumstances and tax thresholds dictate. That means I can likely minimise future tax liability too. Given the last five years have shown double digit fund growth on average too, that’s better than property. Oh, and what’s left in my pension if I die early can be passed on tax free too.

I won’t be having any tenant calls on Christmas Day morning.

While all that is true, you will have costs to pay out running it and if you die not long after drawing it most pension pots die with you, if you run as a company can invest in your own business and bring in family members so they benefit on your death tax free, I have sold the two houses we rented out to buy a family holiday flat for our kids/grandkids to get it out of my estate, we've also bought a second one with sea view as a second home for ourselves which my mrs can claim iht relief on, I did very well out of renting houses but lots of red tape now and you need good tenants, luckily both mine had long term ones the second one had the tenant when I bought it and sold it with them in it. Bad tenants can be a real pain

Brisel · Mar 7, 2021

Dave6170 said:
Michael Caine once said "I've been rich and I've been poor. Rich is best. Not a lot of people know that!"

Pensions aside, I am terrified of retiring and having nothing to do! I love what I do and health permitting, do not ever wish to fully retire.

It's not just the physical side of keeping one's health, but keeping the brain active. Which to my mind is even more important.

I'm with you on this. I have no intention of fully retiring unless I physically have to. I won't be toiling in the cold wet Yorkshire fields all winter though & somewhere with warmth is good for old bones. A few weeks in France in June driving a combine then back here to do the same here. Mrs B has other ideas though...

Highland Mule · Mar 7, 2021

robs1 said:
While all that is true, you will have costs to pay out running it and if you die not long after drawing it most pension pots die with you, if you run as a company can invest in your own business and bring in family members so they benefit on your death tax free, I have sold the two houses we rented out to buy a family holiday flat for our kids/grandkids to get it out of my estate, we've also bought a second one with sea view as a second home for ourselves which my mrs can claim iht relief on, I did very well out of renting houses but lots of red tape now and you need good tenants, luckily both mine had long term ones the second one had the tenant when I bought it and sold it with them in it. Bad tenants can be a real pain

My double digit growth includes all running costs. That’s since last five years so not just a Covid bound.
I think you’re confused too - pension pots don’t die with you unless you buy an annuity - which I have no intent to do. Up to age 75, the pension pot has no IHT if I pass it on when i pass away.

Red Fred · Mar 7, 2021

I find it worrying to think of how many folks I know have dropped off their perches in the last year or two without reaching retirement age. Both dad and uncle David never made it, and my sister's husband and my two female cousins' husbands have all died in their early 60s from either cancer or undiagnosed heart troubles. Add to that my two closest friends who both died of the big C at 56, and it has really affected how I see things.
I'm beginning to think that I should start on a get-out plan with 60 just round the corner and neither me nor Mrs Fred having any offspring to leave anything to. We are both comfortably off with assets, having only got together later in life, but income is going to be a challenge as the estate keep grabbing back land for new schemes and my older sisters are wanting their (reasonable) shares as they retire.

Netherfield · Mar 7, 2021

Some years ago chap turns up we used to deal with, called John, he spots dad and says he wants to ask his advice.

To set the scene, his wife had run off with the corn rep some few years previous, his dad had died relatively young so now John was in partnership with his mother.

His dilemma was thus, I can't both run the farm and look after mother who's showing signs of dementia, there's no wife to help, the lifestyle mum had been used to was going to cost £1,000 a week if in a care home, £50k a year and she might live another 20 years making that a £1000,000, the business makes a profit, but not enough to sustain those figures.

Dad asked him how much is the whole shooting match worth, maybe £1.5 million all told was the answer.

But if he had to keep selling something to pay the fees then the business can't continue to turn a profit like it does.

So like many farms it was asset rich but cash poor, He was told by dad to see a financial advisor and an accountant.

Actually it did work out alright in the end, turns out Mother had an infection which can present itself like dementia, she died not long after while still at home, John died two years ago, whatever happened to the farm I don't know, he had no family to leave it to.

Pension or property

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100% I’ve had enough of farming!

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