Cashing in pension and buying a supercar
Discussion
Just interested in peoples opinions.
Bit of background first.
Im 56 and self employed, Ive paid into a private pension for about 30years , the pension pot is around £130000. That I know wouldnt give me much of an income, even if i dont start drawing from it for another 10 years. I have 3 rental properties which I can sell at retirement or draw an income from , so im not going to be reliant on the personal pension when i do retire. Im not rich or have stacks of disposable income , but I know Ive got enough of my ducks in line to not be worrying about money when I do eventually retire. The wife also has a good pension pot so we,ll be ok.
After tax on two thirds of the pension, If i take the whole thing ,id end up with around £110000.
I guess my whole perspective on life has changed after losing my step son in an accident 2 years ago, life is short , we never know whats around the corner right?
Part of me is just saying, "take the money and buy your dream car", im pretty much sure it would have to be a mclaren, maybe a 570s or 570gt, something around £90k. I think a mclaren around 6 or 7 years old must have dipped to its lowest point in value now.
Im aware of the ongoing costs involved in ownership of such a car, and im aware this is possibly an itch i just want to scratch and in a year or so ,id sell the car once Ive had my fun with it, so with that in mind, Id hope the car wouldn't lose a shed full of money, and I could then invest the money left from the sale.
Am i letting my heart rule my head ?
Bit of background first.
Im 56 and self employed, Ive paid into a private pension for about 30years , the pension pot is around £130000. That I know wouldnt give me much of an income, even if i dont start drawing from it for another 10 years. I have 3 rental properties which I can sell at retirement or draw an income from , so im not going to be reliant on the personal pension when i do retire. Im not rich or have stacks of disposable income , but I know Ive got enough of my ducks in line to not be worrying about money when I do eventually retire. The wife also has a good pension pot so we,ll be ok.
After tax on two thirds of the pension, If i take the whole thing ,id end up with around £110000.
I guess my whole perspective on life has changed after losing my step son in an accident 2 years ago, life is short , we never know whats around the corner right?
Part of me is just saying, "take the money and buy your dream car", im pretty much sure it would have to be a mclaren, maybe a 570s or 570gt, something around £90k. I think a mclaren around 6 or 7 years old must have dipped to its lowest point in value now.
Im aware of the ongoing costs involved in ownership of such a car, and im aware this is possibly an itch i just want to scratch and in a year or so ,id sell the car once Ive had my fun with it, so with that in mind, Id hope the car wouldn't lose a shed full of money, and I could then invest the money left from the sale.
Am i letting my heart rule my head ?
mikeouk said:
....I'd hope the car wouldn't lose a shed full of money....
I think you'd have to assume the car would lose a big chunk of the purchase price (especially if you were buying it at a retail price and intending to actually drive it, rather than keeping it in a garage as part of a 'collection').Many people buy a nice car on retirement, but very few will be spending a large chunk of their fund.
Sorry to read of your loss. As an ex HK Police officer I saw and dealt with many disturbing sights and things. From that experience I took the view of a balance between work/savings and play throughout the last 25 years.
From what you have described even after cashing in the pension fund you have 3 properties that are rental income. Assuming that income covers your living costs then I would say a big yes. Do it.
There will be the usual lot coming on bleating about depreciation etc and worrying about that. So what. It’s a car that you want to enjoy and use. I certainly use mine. Go on what you desire and feel is right for you. I did it and have zero regrets.
From what you have described even after cashing in the pension fund you have 3 properties that are rental income. Assuming that income covers your living costs then I would say a big yes. Do it.
There will be the usual lot coming on bleating about depreciation etc and worrying about that. So what. It’s a car that you want to enjoy and use. I certainly use mine. Go on what you desire and feel is right for you. I did it and have zero regrets.
If you really enjoy whatever you buy, and I hope you do, you will be unlikely to sell it in a year or so. In fact, you will probably find yourself at the top of that slippery slope which dictates that you buy something different,
What a great position to be in.
If you do sell, put on your rational financial head and ask yourself what you have 'lost' in depreciation. I bet that whatever it is, it will have been a great investment for the joy it brings.
Life isn't always about financial gains and losses, is it?
In summary, get on with it..............
What a great position to be in.
If you do sell, put on your rational financial head and ask yourself what you have 'lost' in depreciation. I bet that whatever it is, it will have been a great investment for the joy it brings.
Life isn't always about financial gains and losses, is it?
In summary, get on with it..............
YOLO, etc, but if you’ve thought through the financial side and you’re comfortable, do what makes you happy.
Things I’d suggest you bear in mind: if you’re spending 90k, plan on selling nearer 70k - ie a 20k “hit” for the pleasure of ownership. You may narrow the gap, but that’s a prudent starting point.
Also: bear in mind that cars around that price level, esp with interest rates having gone up, tend not to sell quickly unless they are very special. So if you found that you needed the money in the car in a hurry, you might then come unstuck, or end up increasing the cost of ownership gap.
Things I’d suggest you bear in mind: if you’re spending 90k, plan on selling nearer 70k - ie a 20k “hit” for the pleasure of ownership. You may narrow the gap, but that’s a prudent starting point.
Also: bear in mind that cars around that price level, esp with interest rates having gone up, tend not to sell quickly unless they are very special. So if you found that you needed the money in the car in a hurry, you might then come unstuck, or end up increasing the cost of ownership gap.
As a regulated IFA, got to be careful that you don’t take this as advice.
However, even if you have zero other income the net receipt post tax, including the 25% tax free cash (not a third) would be c£103,500.
If you already have net earnings this tax year, the tax raid could be considerably higher. I.e. you’re very close to the point where you start losing your personal allowance, which would trigger a 60% effective marginal tax rate.
You’ve spent all those years getting tax relief on your income, then you’re going to hand it back with interest to HMRC to buy a supercar? At least go in to it with your eyes open and think long and hard before acting.
However, even if you have zero other income the net receipt post tax, including the 25% tax free cash (not a third) would be c£103,500.
If you already have net earnings this tax year, the tax raid could be considerably higher. I.e. you’re very close to the point where you start losing your personal allowance, which would trigger a 60% effective marginal tax rate.
You’ve spent all those years getting tax relief on your income, then you’re going to hand it back with interest to HMRC to buy a supercar? At least go in to it with your eyes open and think long and hard before acting.
mikeouk said:
pension pot is around £130,000. I [also] have 3 rental properties
After tax on two thirds of the pension, If i take the whole thing ,id end up with around £110,000.
Some questionable Man Maths there.After tax on two thirds of the pension, If i take the whole thing ,id end up with around £110,000.
25% tax free = £32,500
Balance of £97.5k taxed at, say, an overall 45% leaves £53,500
Net cash in your pocket = £86,000
Or to put it another way, pulling the whole of a pension pot out at once can be incredibly tax-inefficient. You'd almost certainly be better off to sell some BTL and buy a car with that, since max CGT rate is 28% and you'd only pay tax on your gain.
zedmtrappe said:
If I were in your shoes I definitely would.
What is the worst that can happen ?
Prices of all ICE cars could collapse in 2030 when they are phased out and the nearest petrol station in 2040 is five miles away.What is the worst that can happen ?
How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
Wacky Racer said:
Prices of all ICE cars could collapse in 2030 when they are phased out and the nearest petrol station in 2040 is five miles away.
How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
I've been thinking they will go up, not down, as you won't be able to buy new ones?How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
Wacky Racer said:
Prices of all ICE cars could collapse in 2030 when they are phased out and the nearest petrol station in 2040 is five miles away.
How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
I can see a tipping point like that being reached for mundane cars, but not so much for supercars. Supercars are generally only driven a few thousand miles a year, and the owners have already accepted some significant compromises in order to drive them, having to take a 10 minute round trip to fill up is unlikely to massively affect value.How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
I live in an urban environment, like 85% of the UK population, and there are 17 petrol stations within a 3 mile radius of my house (direct line, not driving distance). 80% of petrol stations could close down and I'd still be able to fill my car up without significant inconvenience. I wouldn't fancy driving across town to fill up the family car each week, but doing it every three weeks in the Ferrari wouldn't massively shift my perceived value.
This question has no answer, it's like someone asking "should I have the chicken or the fish"; it depends if you like fish. Or "should I invest in corporate bonds or an ITF"; it depends on your risk preference.
It's guaranteed this will cost you a lot of money. You'll get taxed when you cash in the pension, you'll have to pay to maintain the car, you'll probably lose money on the car itself (maybe not, but it's best to assume you will), and you'll spend a lot of money taxing and insuring it. Will all that money be worth it is something only you can answer.
A question I get asked a lot is what it's like owning a Ferrari. My answer is always the same; it's everything I always hoped it would be. It cost a lot to buy, and a lot to run, but there is nothing else I could spend the money on that I would get more joy from and I have never regretted my decision. If I was you I'd think about how much this is likely to cost; taking the higher end of the estimate for everything, then think about what else you could do with that money, be it holidays, home extensions, whatever. Do you want those things more than a supercar?
It's guaranteed this will cost you a lot of money. You'll get taxed when you cash in the pension, you'll have to pay to maintain the car, you'll probably lose money on the car itself (maybe not, but it's best to assume you will), and you'll spend a lot of money taxing and insuring it. Will all that money be worth it is something only you can answer.
A question I get asked a lot is what it's like owning a Ferrari. My answer is always the same; it's everything I always hoped it would be. It cost a lot to buy, and a lot to run, but there is nothing else I could spend the money on that I would get more joy from and I have never regretted my decision. If I was you I'd think about how much this is likely to cost; taking the higher end of the estimate for everything, then think about what else you could do with that money, be it holidays, home extensions, whatever. Do you want those things more than a supercar?
Wacky Racer said:
Prices of all ICE cars could collapse in 2030 when they are phased out and the nearest petrol station in 2040 is five miles away.
How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
As you say it might happen although what also might happen is that given ICE cars aren’t being actually phased out per se ( new car sales of ICE are ) other than mundane cars as already replied with , supercars / special cars ( or whatever tag you want to give them ) might actually increase. How much is a £200,000 "E" Type going to be worth then?
Not saying it's going to happen, but it might.
The way Rishi is trying to win votes it also wouldn’t 100% amaze me if the 2030 date moves back anyway.
Sorry OP , slightly off topic.
My view on your question ( and sorry belatedly to read about your loss ) is that if you have done the numbers ( based on the correct tax ) and can afford it then go for it !
However it’s not just the purchase price you need to factor in obvs.
Given the pitiful returns from rental properties given the way landlords have been bashed over the last few years and that Labour, if they get in, are likely to align CGT with income tax, in your shoes I would be selling one (or more) of the rental properties and using the proceeds to buy the car, investing the rest in my pension and/or ISA.
I have no idea what that pension gets you but it doesn't sound like a wise idea to cash it in for a car. Your dream car, whatever it is, will have problems and probably cost more than you think. Fair enough if you want to live like there's no tomorrow, but there more than likely is, and surely it's better to have a regular income that can be enjoyed in other ways.
Either way, I hope you make the best decision for yourself and good luck.
Either way, I hope you make the best decision for yourself and good luck.
85Carrera said:
Given the pitiful returns from rental properties given the way landlords have been bashed over the last few years and that Labour, if they get in, are likely to align CGT with income tax, in your shoes I would be selling one (or more) of the rental properties and using the proceeds to buy the car, investing the rest in my pension and/or ISA.
You and I are very much on the same page with this one.Gassing Station | Supercar General | Top of Page | What's New | My Stuff