What to do next- invest outside pension or buy BTL

Bern78

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But of background: 2 income couple good secure jobs. Early 30s - mortgage will be finished in less than 5 years. Pensions maxed out to limits for our age. Life insurance, income protection all sorted and have buffer of savings if very unexpected job loss.

After all the usual bills and childcare have excess savings and wondering how to invest. I know I could invest in shares but we are 100% invested in equities through our pensions with Zurich and Irish Life. Would investing outside a pension in equities/etfs ( I have read re tax treatments etc) be overload. The other option is buy a 3 bed semi in a location that we are familiar with for 200k. I do want to leave both my children with a house when I die as I believe life and building wealth will only get harder. Would I be better investing in a buy to let- I have also read a lot re tenant problems and am aware of all the ridiculous regulation that the Govt has brought in. I just know that by doing nothing I will lose money with inflation. Any thoughts welcome?
 
Why not pay off your mortgage early?

Once you are mortgage-free, you could start buying (tax-free) State savings products with your after-tax savings, while keeping your pensions invested 100% in equities.
 
Why not pay off your mortgage early?

Once you are mortgage-free, you could start buying (tax-free) State savings products with your after-tax savings, while keeping your pensions invested 100% in equities.

That is true- could just get the mortgage paid off earlier and then see what to do. I hadn’t thought of State savings because I was wondering do they keep up with inflation.
 
5-year State savings certs currently yield 1% pa if held to term. CPI is currently a shade over 1%.
 
I do want to leave both my children with a house when I die

That is not a reason to buy a house now.

If you buy a house now for them to gift to them when they are in their mid twenties, the house might not be where they want to live. (They will probably be in their 50s when you die.)

You already have an investment in property via your family home.

So pay off the mortgage and then invest directly in equities. This is the most flexible, most liquid and least hassle way to invest.

State savings are not guaranteed to match inflation.

Brendan
 
I disagree, I would invest in property. You can always sell it in years to come when the market bears fruit. Plus, there's great demand currently for rental properties so you should get a good tenant, long term if possible.
 
I disagree, I would invest in property
You've certainly changed your tune on this.

@Bern78
I'm not in too dissimilar a position, just a few years ahead. Already mortgage free, and maximising pension.
I've started thinking about passing on wealth to my (still very young) children.

Firstly, I'm not a fan of leveraged investment in individual properties as the risks are often underestimated.

What I've done is set up a bare trust with a life company. The trust is for the benefit of my children when they are adults. I'm putting in almost the maximum possible under the small gift exemption limit each year, so this doesn't impact their lifetime inheritance threshold. That's invested in a cheap global equity fund. Life company looks after all the admin and pays the tax after 8 years, etc , saving me the efforts of doing tax returns.
If I'm not wealthy when they're finishing school, the fund will fully cover their 3rd level education. If I can afford to pay their education costs, I will, leaving them with a nice little starter fund. Stress free on my part, no tax returns, and I'm not tying myself into a cashflow negative investment if something goes wrong with a rental property.
 
@RedOnion

The bare trust route certainly sounds like a convenient way of providing for children.

However, could you tell us the (disclosed) establishment and ongoing costs of such an arrangement?

Also, I assume the 1% Government levy applies to each contribution (in addition to the 41% exit tax).
 
@Sarenco
Yes, the 1% levy applies, plus 41% exit tax.

There's no establishment costs, a bare trust is literally a 1 page document that sets out the beneficiaries. The ongoing fees are the same regardless of whether there's a trust or not.

It's on my list to review fees that I'm paying on this. What I did find was the fees were reduced significantly by putting in a lump sum at the start.
 
@Red Onion the bare trust sounds good and then I could make use of the tax free exemption each year at least.

what are the ongoing costs on yours - the amc? I assume if I just find a good broker that is not commission tied I will be able to find one of these
 
what are the ongoing costs on yours - the amc?
I'll need to dig it out - I thought I had a copy in my email but I can't find it right now.

Mine is with New Ireland, but I know Standard Life and others do similar products. I remember by putting in a minimum 7,500 at the start the ongoing fees were reduced. And there is additional fees for some specific funds.

Edit: found it. I'm paying a management charge of 1.25%. That doesn't include the costs within the fund itself. I need to do a review of it, and might update. The balance is hopefully going to be bigger than I imagined when I started out a few years ago.
 
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Red Onion- did you ever think about investing in an etf ? You can get low TERs - I know there is the tax burden and the admin of it all and then it also wouldn’t be in the child’s name.
 
What I've done is set up a bare trust with a life company. The trust is for the benefit of my children when they are adults. I'm putting in almost the maximum possible under the small gift exemption limit each year, so this doesn't impact their lifetime inheritance threshold. That's invested in a cheap global equity fund. Life company looks after all the admin and pays the tax after 8 years, etc , saving me the efforts of doing tax returns.
If I'm not wealthy when they're finishing school, the fund will fully cover their 3rd level education. If I can afford to pay their education costs, I will, leaving them with a nice little starter fund. Stress free on my part, no tax returns, and I'm not tying myself into a cashflow negative investment if something goes wrong with a rental property.

Do you reckon the expected (net) return is worth the risk? I guess your investment horizon at 15-20 years is not so short.

I'm in a similar situation myself in wanting to use spare cash to prepare for kids' education which will start in a decade or so.

State savings won't even beat inflation over the period but that had been what I was going to use. Your bare trust idea is tempting but the fees and tax is a bit off-putting. A capital loss can't be ruled out over the period either, and I'd struggle to explain that to Mrs NRC at the end.......
 
I'd struggle to explain that to Mrs NRC at the end.......
Just tell her a random guy on the internet suggested it!

I'm hoping that I won't need it for their education, but either way there's a 10 year plus horizon on it. Overall it's not a huge portion of my net worth and I'm lucky I can look at it like that.

Separately I've put money into 5 year state savings, and I've invested directly in equities.

Red Onion- did you ever think about investing in an etf ? Y
Specifically in relation to putting money into my children's names, I like the simplicity of the life fund. I know it's legit from a tax perspective, and someone else does all the admin. I don't currently have to do a tax return so I don't mind paying someone 1% to look after the tax and admin aspects. However the number that the 1% is being calculated on is growing so I might review that.
 
I'm hoping that I won't need it for their education, but either way there's a 10 year plus horizon on it.

In the event that you don't need it to fund your children's education, can it continue to possibly provide for college fees? Or does it just pay out on their 18th birthday?
 
Or does it just pay out on their 18th birthday?
I should have been clearer to say that I meant 3rd level education.

Each of the 'standard' bare trust documents specify the treatment. Basically mine cannot be accessed before they reach 18 (even if I wanted to). The money is legally my children's, and I'm a trustee looking after it for them. I removed the clause that ends the trust at 18, so it's up to me to decide when the trust ends. However the advice I've been given is that on reaching 18, I get each child to sign a declaration indemnifying me for any losses in the trust.

If I want the trust to pay for their 3rd level education, I'd effectively cut the children loose, end the trust, and then they'd have the money available to pay for it themselves. It's not my money.

If you have a quick Google in Standard Life or New Ireland they have packaged up the bare trust instrument and there's a good bit of information on it.
 
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