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Chris Stein
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Chris Stein
This article has no content! Surely an analysis of the two vehicles needs to examine costs vs benefits, to the best of their knowledge. When looking at property the costs include: purchasing costs (surveyor, solicitor, insurance, bank transactions, mortgage and broker fees), purchase taxes (SDLT), maintenance costs (wear and tear, voids, mortgage interest and management fees), maintenance taxes (income, ground rent (if leasehold) and reduced tax relief), sales costs (surveyor, solicitor, bank transactions) and sales taxes (CGT). This article only seems to refer to STATE pension, but what about workplace pensions or SIPPS? The costs are ... well very low and apply only if you are running a SIPP through a broker, online or otherwise, where the transaction fees can be as low as £5 per transaction. Depending on what is bought in the SIPP, the ongoing management costs of an ETF can be as low as 0.1% per annum - as opposed to 3% mortgage interest payments. Finally, there are no CGT on earnings inside the SIPP, though income tax is applied on withdrawal. Even then a person can take out 25% tax free and invest in an ISA where withdrawal will be tax free. There are also the benefits of pensions. Tax is deferred meaning the amount put into the pension pays no tax at source - as opposed to buying property where the money to buy the property is already taxed. There is a 20% uplift on the money invested through the tax deferral and this is even greater depending on a company's pension scheme. Investing in ETFs, as an example, through a SIPP also allows global diversification and would you bet on the growth of the UK property market being greater or less than the growth of India, say, over the next 20 years given that India has a population of 1.3BN people, 66% of which is under the age of 35? Where I am less clear is on the issue of transference to next of kin. My understanding is that this is easier to do through paper assets than transferring property, especially portfolios of property, but I could be entirely wrong on that. I honestly think these articles need to provide FAR more analysis than they do in order to by objective.

From: Chris Stein 09 April 2018 09:22 AM

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