Read how Joe increased his pension plan.
(If you're looking to boost your pension, make a coffee take 5 minutes and read this, it could change your life.)
Joe is 50 and his wife, Joanne, is 45. They live in England and they'd like to retire comfortably in five years time.
They've been sensible over the years and saved for their pension, by July 2008 they had a pension fund of £150,000.
The crash of Autumn 2008 slashed the value of their retirement fund to £80,000, it's recovered a little since, but only to £90,000.
Joe checked the Government's site, www.fsa.gov.uk/tables/ to see how much pension he'd get if he retired as planned at age 55.
Point your mouse here to see how much Joe will get from his current pension plan
Joe ignored further growth in his pension fund, but equally ignored the effect that inflation over the next 5 years would have on the value of his monthly pension as he figured that these two factors would counteract each other.
He did, however, allow for making further pension contributions for the next five years. These, he figured, would increase the value of his retirement fund to £110,000 at today's values.
After diligently filling in the boxes on the Government website, Joe discovered that his pension would be just £458 per month.
Even if he made drastic changes to his choices, like taking up smoking to impair his life expectancy, cutting his wife out of his pension benefits and reducing his guaranteed benefits to zero, his pension would still only creep up to £595 per month.
How about putting off retirement and continuing contributions for another 5 years to get the fund up to, say, £140,000?
Even with his drastic choices still in place, he was still going to get less than £1,000 a month
To drown his sorrows Joe went to the pub (while he could still afford it) and bumped into Harry.
Mouseover here to read about Joe and Harry's conversation in the pub.
Joe sat silently sipping his pint as he listened to his friend.
At first it didn't help that Harry was so chirpy, he'd just got back from the Bahamas where he'd had a great time fishing and sailing and relaxing.
Joe asked him how he could afford such holidays and still provide for his pension, only to be told by Harry that,
"The Bahamas is my pension."
Continue reading about Harry's retirement plan in the Bahamas
Harry went on to explain that he'd bought some land in The Bahamas from a developer.
The developer was selling at a very reasonable price because he was using the revenue as seed capital for a major resort project. The new resort project would soon put a 5 star hotel, marina, golf course, tennis centre and goodness knows what else just minutes away from Harry's land.
"It's bound to make it more valuable," said Harry, "and my land's already got planning permission. I can build a nice house on it."
Joe thought for a while and soon decided that Harry's strategy sounded rather risky. He said as much to Harry.
"Not really, " said Harry, "I have freehold land with planning permission. The resort next door has already got planning permission too. But that is only the start of it, the developer has also given me a signed contract that allows me to buy into the new development at a knock down price, so I get two bites at the profit cherry."
"Sounds expensive," said Joe, "where did you get that sort of money"
"I had money in my pension fund. I used that to buy the land. It cost me less than £60,000 and the great thing is that the right to buy into the new development is mine personally, outside of my pension fund," replied Harry.
It took two pints for Harry to explain his full plan. He reckoned that by the time he wanted to retire the resort next door would easily have increased the value of his plot to double what he paid, so he'd have £110,000 in his pension. Then he figured on buying and selling the plot in the new resort development, which would give him an estimated capital gain of £200,000.
Even after capital gains tax there'd be £165,000 left and if he put that into his pension fund before he retired then the Inland Revenue would top it up to over £200,000 again.
With normal contributions until he retired his total pension fund would be over £330,000 Harry figured he could retire on about £2,000 a month.
In the meantime he was happy enough to pop over to The Bahamas from time to time to check on his investment.
Joe went home and checked the Government's website, he found that Harry hadn't been far out.
He'd be able to retire at 60 on £1,938 a month.
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Location, Location, Location.
We've all heard the saying that these are the three most important things to consider when investing in property.
Generally speaking the best locations will appreciate at a faster rate than less favoured areas, they will attract tenants more easily and those tenants will tend to be of a better quality. Provided the entry level for investment is affordable, then a purchase in one of the best locations will be the destination for the clever money.
Timing.
An investment in August 2007, even in the very best location, would probably have been looking a little sorry for itself in August 2009. History shows us that over the long term an investment in good property is likely to do well no matter when in the economic cycle the investment is made. However, there is no doubt that the investments made at the bottom of the cycle produce considerably better results than those made at the peak of a boom. Now is the time that the clever money is getting back into property investments.
Opportunity.
The professional property investor will always be on the lookout for an opportunity to gain an additional revenue stream from an investment.
Maybe a planning consent or some additional development could enhance the value, or revenue could be generated from a billboard or a mobile telephone mast. The clever money will always be on the look out for an opportunity.
Amenity.
The provision of new amenities can be a controversial subject. Often planning applications are contentious, especially for large infrastructure projects such as roads, airports, golf courses and the like. Yet, once those amenities are in place they are, generally speaking, enjoyed by most people. Almost invariably they add value to the surrounding property. An area that is likely to be enhanced by additional amenities without cost to the individual property owner will be very attractive to the clever money.
Taxation.
The clever money knows that taxation is its enemy and will seek to avoid it to the maximum degree permitted by law.
Security.
Good, provable title, backed by a robust legal system is a must, as is a well developed and competitive insurance industry offering comprehensive cover.
A stable jurisdiction, which permits ownership by foreign nationals without circumventing the law, is attractive to "clever money".
Enjoyment.
Not a strict requirement for the clever money, but if the choice is between an investment in a cold, rainy climate and one where the sun shines more often than not, the beaches are fine sand and the sea is a stunning shade of turquoise, then why not pick the latter.
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