Terminal Gratuity: pay off mortgage or invest?
Nexialist
Join Date: Jul 2003
Location: Milton Keynes
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If you are thinking of investing rather than paying off the mortgage, you have to remember that except for ISA's you will generally be paying income tax at your marginal rate on the interest.
For a higher rate tax payer this is 40%. So a 10% return - which is UNHEARD OF for "normal" investments, turns into a 6% return after tax - around where the mortgage rates are.
Pay off Loans, Credit cards and Mortgage, but keep 3 months salary for instant access.
As for Financial Advisors there are now 3 types - 1. Tied to the organisation they work for. 2. Working from a limited panel of companies (they are allowed to call themselves Independant) and 3. Fully independant.
A good rule of thumb guide is to ask if they will rebate commisions back to you and work on an hourly rate, if they will you're onto a winner. It will cost a fair chunk - around £100 per hour, but you get zero bias in his or her advice
For a higher rate tax payer this is 40%. So a 10% return - which is UNHEARD OF for "normal" investments, turns into a 6% return after tax - around where the mortgage rates are.
Pay off Loans, Credit cards and Mortgage, but keep 3 months salary for instant access.
As for Financial Advisors there are now 3 types - 1. Tied to the organisation they work for. 2. Working from a limited panel of companies (they are allowed to call themselves Independant) and 3. Fully independant.
A good rule of thumb guide is to ask if they will rebate commisions back to you and work on an hourly rate, if they will you're onto a winner. It will cost a fair chunk - around £100 per hour, but you get zero bias in his or her advice
Join Date: Apr 2005
Location: France 46
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Buying Overseas
Just remember that your "Pension" is classified as a "Government Pension"; and that, no matter where you live on this Planet, HMG
WILL continue to tax you in the UK on that Pension.
So No 1 Priority is, if you intend to reside overseas, to ensure that there is a "Dual Taxation Treaty" between your "Residence of Choice" and UK. It may also be benificial to "commute" the maximum dependant on Taxation rates; but one would need Specialist advice on that.
WILL continue to tax you in the UK on that Pension.
So No 1 Priority is, if you intend to reside overseas, to ensure that there is a "Dual Taxation Treaty" between your "Residence of Choice" and UK. It may also be benificial to "commute" the maximum dependant on Taxation rates; but one would need Specialist advice on that.
Join Date: Oct 2002
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No job is permanent and when you are unemployed the greatest millstone is the mortgage. If this happens do not expect any sympathy from banks and building societies. Even you are employed, the mortgage outgoings can still represent a fair chunk of your after tax earnings. Pay the mortgage off and feel the relief. Best thing I ever did.
Buying Overseas
Cazatou,
I am in receipt of an RAF Pension and the Inland Revenue have just agreed to permit "Paymaster" to pay it gross to me. However, it has to be declared at the end of the Tax Year to the New Zealand IRD and at that point I pay the tax on it.
But in the meantime its a nice little earner
Certainly commuting makes sense as it reduces the ongoing tax burden to me particularly as NZ Tax ends up as more than UK Tax for the same salary/pension combination.
(BTW for NZ read any country with a dual taxation agreement)
I am in receipt of an RAF Pension and the Inland Revenue have just agreed to permit "Paymaster" to pay it gross to me. However, it has to be declared at the end of the Tax Year to the New Zealand IRD and at that point I pay the tax on it.
But in the meantime its a nice little earner
Certainly commuting makes sense as it reduces the ongoing tax burden to me particularly as NZ Tax ends up as more than UK Tax for the same salary/pension combination.
(BTW for NZ read any country with a dual taxation agreement)
Join Date: Jan 2006
Location: Hemel Hempstead
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Always pay off your debts with the highest interest debts first. Clear the mortgage if you can. This is what we did when I left the mob in '87. Continue to pay the mortgage payments to yourself, and the family saving soon add up.
Whenever we needed a new washing machine/fridge/TV etc we asked the shop how much it would cost over 2 years. Then bought it cash and payed the HP payments into our savings for the next 2 years. In edffect we were our own bank.
Also joined the RAuxAF working on the view that if civi job went tits up, I would still have an income, and RAF stuff is easy to an old hand init???
Result is all the advantages of mess life, access to gym, etc etc and the pay from a civi job. Also enough dosh to be able to retire from my civi job in 14 more days. Staying in the RAuxAF though. to trickle feed the bank account, while now taking long holidays in exotic locations.
Whenever we needed a new washing machine/fridge/TV etc we asked the shop how much it would cost over 2 years. Then bought it cash and payed the HP payments into our savings for the next 2 years. In edffect we were our own bank.
Also joined the RAuxAF working on the view that if civi job went tits up, I would still have an income, and RAF stuff is easy to an old hand init???
Result is all the advantages of mess life, access to gym, etc etc and the pay from a civi job. Also enough dosh to be able to retire from my civi job in 14 more days. Staying in the RAuxAF though. to trickle feed the bank account, while now taking long holidays in exotic locations.
Last edited by RayDarr; 14th Jul 2006 at 09:06.
Cunning Artificer
Join Date: Jun 2001
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I guess Blacksheep had a bad experience
But finding one of these mythical money magicians is a trifle tricky. You may PM me for an e-mail address FJJP if you've one to recommend. I retire again soon.
Join Date: Apr 2005
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Not Long Here,
That does seem to be a new development. Perhaps you could let the RAF Pensions Society/ RAFA /British Legion have copies of the correspondance. It could affect a lot of people.
Even after 5 letters to HM Inland Revenue, I have not yet had a reply regarding my new address; mind you , I haven't had one from Barnwood either.
That does seem to be a new development. Perhaps you could let the RAF Pensions Society/ RAFA /British Legion have copies of the correspondance. It could affect a lot of people.
Even after 5 letters to HM Inland Revenue, I have not yet had a reply regarding my new address; mind you , I haven't had one from Barnwood either.
Not sure I've ever met a truly independant IFA - even if in theory unattached they always have their favourite Investment companies which they try and push you towards at every opportunity.
With the cost of borrowing on the rise I would pay off the mortgage !
With the cost of borrowing on the rise I would pay off the mortgage !
