Using a Loan to Buy Cheap Pension Shares

R

ringledman

Registered User
Messages
620
Hi,

I have read on a few occassions that people starting out on their pension can use a loan to their advantage to fund their pension early enough and then pay the loan back over a fairly short period.

The aim being to boost your pension contribution early and gain the benefit of a number of years extra in the pension for the lump sum.

What are people's thoughts?

I'm 30 and think that the markets will soon reach a new low as we have yet to really see them capitulate where everyone sells off marking the bottom. At this point invest a lump sum, say a 15k loan and pay it off over say 5 years.

Thoughts???!! Would the 30-35 years invested for the lump sum significantly outperform the interest payment on the loan, even with management charges and inflation accounted for? I reckon.

Cheers.
 
Its a risky strategy. Shop around and you'll find that the overall effect of charges on a pension fund will probably be between 1 and 2% per year of a drag on the fund. Unsecured personal loan from Askaboutmoney Best Buys - Tesco at 6.9%.

There are also some geared pension funds out there, where the fund itself does the borrowing. [broken link removed].
 
Thoughts are:
1: Don't try to time the Markets
2: Instead of putting in €15k now and paying off €3k per year why not just start a pension with the €3k per year and increase it as disposable income frees up
3: Don't expect to get money for nothing on a pension (apart from the tax benefit). Looking at 10 year returns now people are starting to realise that you can't magically make money by borrowing to invest.
 
You must log in or register to reply here.
Menu
Log in
Register