Old Chestnut

[pipme]

How can anyone commanding such a salary be so silly ?
Or has he just been lucky and not realised it yet ?
Got a new word for this situation, no disrespect, Tsunami !! One minute there are no problems, then one is inundated and it's too late to act.

 

[planenut]

Some may accuse him of lack of forethought, but maybe he's got enough invested in property and savings that will actually give him a small income that he thinks will keep him, his wife, and feed his grown-up kids when they keep coming back.

 

[pipme]

Apparently he has very little savings, about to be used up repaying car loan, and a £200,000 mortgage on a £276,000 home .....
I am always concerned when this Govn keeps giving a warning, especially about property as a pension hedge .... They have their beady eyes on our equity, and will soon use the excuse of first time buyers (quite valid) being unable to buy, to effectively torpedo that hedge in some way.
Watch out ! the cynical bu##ers are allowing personal pension investment in property ... Something is in the wind, when they make offers tis usually in something about to be rendered worthless ... I wonder ?

 

[chainsaw_masochist]

He may be quite unwise to have made no pension provision, but one can imagine that he has not been encouraged by some of the disasterous happenings within that industry. These cases do not simply relate to policies that people have elected to take out through their own initiative, but traditional, major company pensions funds that have been all but pillaged by venal boardroom shysters and the like.

All followed in the wake of Thatcher's deregulation in the eighties. Lamentable.

 

[AdamW]

At the moment property is probably a safer bet than pension plans! My company for instance, has been very naughty with their pension funds and many of my 55+ year old colleagues get distinctly heated when you mention the word "pension scheme".

Hopefully the government will change the rules on pension management so companies can't take "payment holidays" just because the fund looks healthy at one moment in time.

Granted, these people are being a bit silly, with a joint income of £85K and a £200K mortgage they should be able to save plenty and still have a good lifestyle. But I don't think they are being totally stupid.

For instance, paying the car loan off early: The interest saved will probably exceed any profit earned through investing or saving that money.

 

[chainsaw_masochist]

Granted, these people are being a bit silly, with a joint income of £85K and a £200K mortgage they should be able to save plenty and still have a good lifestyle. But I don't think they are being totally stupid.

For instance, paying the car loan off early: The interest saved will probably exceed any profit earned through investing or saving that money.

Ain't having a car loan in itself "a bit silly"?

 

[pipme]

From here

...Baroness Hollis of Heigham:
..I also wish to endorse the points made by my noble friends Lady Turner and Lady Greengross about the long-term impact of the contributions holiday from 1987 onwards. It has accounted for something around 30 per cent of the current deficit in pension funding and actuaries now tell us that it was probably unnecessary in terms of the 105 per cent cap. It was used to prop up corporate returns......

I believe the 105% cap refers to the size of the fund, after which pension hols may be taken ..... I do not think this was a 'snapshot' view of the fund, as has been recently the requirement, so may have been open to some pretty creative accounting.

I think the guy in question was 'silly' not to spread his 'bets', he needed to take advantage of his tax position, 40% discount on pension cotributions, having fully read the article .. he is now beginning to see the light, however dim it may be from his distant viewpoint ....
P

 

[AdamW]

OK, say he had £12500 to spend on a car back in 2002. He buys a 1.6 5 door Focus LX. Fairly typical family hatchback.

Devaluation kicks in, that car is now worth about £7000 in good condition (trade-in at an independent dealer, according to Parkers). So, it has devalued by £5500.

Say he got a loan instead, and bought a BMW X5 3.0d auto.

£34,365 new, now worth £31400. That's a devaluation of about £3000.

Interest on the loan would be a little over £1900 over 3 years (yes, that surprised me too, but car loans seem to have become cheaper!)

So, the devaluation plus interest on the X5 comes to around £4900.

Admittedly, servicing and insurance for those 2 or 3 years would offset this considerably, but it shows that job security aside, buying a big expensive car isn't as insane as it sounds.

 

[pipme]

Mmmm ? See where you are coming from.
It would be difficult to sell me a car 3yrs old for £3k less than a brand new one, especially when the £3k is less than 9% of the new cost ... I wonder how many have actually sold 'real secondhand 36k miles' at those figures ?

I would imagine we are also getting into potential cash flow problems here ... £1k or so pm on £34.4k 3 yrs
P