Private / personal pensions

Sharing my views towards your idea of cashing personal pension to buy properties in Bulgaria for solely rental income, I am afraid that it may not be a good idea to invest properties in a country with declining and ageing population. The country's current population is 6.61 million in 2024 and the projected population by 2050 will drop to 5.1 million because the demand is expected to be stable and slow.

If you stay in Bulgaria for retirement and you actually use the property, that is fine because this will save your rental expense.

https://www.macrotrends.net/global-metr … population

In addition, Pound sterling exchange rate has been stronger than last year by 5% against Euro, this helps to offset the inflation cost of living in Bulgaria. 

@cyberescue1

As your current rental properties are AirBnB so aimed at tourists rather than long-term residents it might work. But it's risky, because of course, in a major economic crash scenario people may not be taking holidays abroad so often, either. Also, property prices are high right now, even with good contacts in the business finding reasonably proiced suitable properties could be a challenge.

Unfortunately there's always a risk with any pensions or other investments. I just paid up an incomplete year of National Insurance Contributions in the hope that will boost my state pension. But I also saw that as a gamble. Despite the withdrawal agreement, I am concerned the UK government could alter or reduce pensions for those overseas. Certainly, the previous government already in effect did this for anyone retiring to the former Commonwealth countries of Australia and Canada. There are no cost-of-living increases, so pensioners who retired there ten years ago are finding their UK pensions now have rather limited buying power.

If your pension fund is interest rate based, almost certainly the base rate will drop again this year, so that will affect what you're paid. But I'd be surprised if the budget is dire enough to cause a massive crash. However. I do think that as the GBP is currently strong against the EUR (or it was this morning, that might have changed!) it could be a good time to buy euros or leva if you have any spare pounds lying around.

My very uneducated opinion, not actual financial advice!

This is not financial advice, but as I'm only 38 I have been investing in the stock market for a while, there is a lot to learn so don't go rushing in, it's easy to lose everything!

I'm not expecting a state pension to be available to me when the time comes, and I'm expecting massive hurdles to get my private pension, my only saving grace is my armed forces pension that I have accrued over time, even that they keep messing with, because of this I started investing in the stock market a little bit at a time and built up a little reserve over time, it helped me pay for my current property in BG by selling what I earn and sold off almost everything to pay it out right.

I started again earlier this year, and it's going well, I'm hoping to get approx £300k in there and live off the returns when in BG (roughly aim for 5%, that's £15k a year to waste), as well as any pension I may get.

That's the plan, if it works who knows?

I know it will be a lot harder gathering that much money to do the same if you're already retired and have a lot less income, but you may be in a situation that you can do something similar but aim for a lower amount?

I think property in Bulgaria (unless in the big cities) will not be worth investing in for ROI, the demand is not there and from projections it's only going to fall even more, unless there is a scheme to replace the falling population I can't see there being any demand outside the cities.

You could however look at running a B&B? Short breaks away from the hustle and bustle of city life, disconnect from society for a bit if you have a suitable location up in the hills?

But then you would need to think about either working yourself or employing others, I'm unsure of how taxes etc work as yet.

I don't think any government will directly attack pensions for a good couple of decades, it one of the largest voter bases in the UK currently, it's political suicide.

I think your pension is safe for now.

Banking & market crashes, I can't see this happening for a while, if anything it will come from the US first and there be nothing safe, it will be as bad if not worse than the 2008 crisis.

The best line of defence is to ensure you are as self-reliant as possible, then you won't need to stress over money so much.

@cyberescue1

It's not typically cost-effective for folks to cash private pensions, and I doubt you would find a legitimate UK financial advisor who would encourage you to do this.

If you did it anyway, I'm not sure why you'd feel than Bulgarian real estate is substantially less risky than the stock market. If you're concerned about stock market risk, then some private pensions allow you some element of control over how/where your pension is invested (so you can choose less risky funds, or diversify across multiple markets/funds).

It's great if you have a private pension, but you shouldn't ignore your public pension. The UK allows us to make up missing years of NI contributions in order to get a full pension. These "voluntary NICs" are excellent value, and usually one of the best investments you can make. I made up over 15 years (at the cheapest rate for self-employed overseas), so I'm very happy that I will get a full pension (especially so as I don't have a private pension). As far as I'm aware, increases in the UK state pension apply if you retire in the EU.

I'm lucky that I managed to save a bit over the years. I have some in property and some in my brokerage account (mostly blue chip dividend stocks in UK/Europe/USA with a bit of tech for excitement).

For extra income, I can do a bit of remote teaching. Bulgaria's a great place for digital nomads/remote workers as it has excellent internet connectivity, with low local costs/taxes. The typical foreign income is often higher than the equivalent local salary. (My local teaching salary was a measly 5 euros per hour, it's not hard to beat that online, especially as I don't have the cost/aggravation of commuting to work.)

A related article today on Expat.com about frozen pensions - though discussing state pensions not private: https://www.expat.com/en/expat-mag/1091 … broad.html

UK state pensions are currently protected by the withdrawal agreement for British citizens (or those who've paid in at least 10 full years UK National Insurance) when moving to the EU. So, we have to hope the government continues to honour the withdrawal agreement!

Hubby unfortunately took extremely bad advice before we met and stopped paying into his NHS pension years before we met, so unfortunately only gets a fraction of what he could have done, but this and many other final salary work-based pension schemes should continue to pay out as promised, including cost-of-living increases.

I'm squirreling away as much savings as I can at present, though with interest rates lagging behind inflation, i need to look at a better investment. I do wonder when we can finally move and sell our small UK house whether buying a UK apartment to rent out would be a wise investment. Hard to say. It's less of a bubble here than Bulgaria, but with massive new home building happening and promises of lower immigration, possibly house price growth will slow considerably here.

Why does that crystal ball always malfunction when I need it?

The present property bubble in BG looks depressingly like the last one here, with (at least in Sofia) frenetic building work everywhere. There seems to be plenty of hiccups, with half-built house/complexes sitting unattended for months, or even years, before work suddenly restarts.

I'm fairly confident that this bubble will also burst, with bargains to be had by those with some cash behind them. Rents have historically been unaffected by the booms and busts, but ROI is somewhat low and often precarious.

The world is getting weirder by the day: it's not easy to tell whether any given course of action is going to prove sensible or foolhardy, or just how bad the world situation might become. I'm wondering whether to start stockpiling rubber boats, either for sale or for my own use....🤔

Jane, I'm sure you will but remember to do your research into the current landlord business situation here in the UK, there's a lot going on in that sector right now, and with the protections given to tenants (rightfully so) there is the issue of a bad tenant ruining your plans for a long time, and you are having to pay out a lot of money from your own pocket to cover the cost involved until they are removed.

Not forgetting, I see something going on with parliament select comities (Renters Rights Bill)? Where they were talking of rent caps further reducing your ROI, and even forcing every landlord to operate as a business rather than a sole person, further increasing costs.

Good luck with whatever you choose.

@CarlS1986

You're right that tenants deserve to be protected from unscrupulous landlords but I'd say that the pendulum has, as always, swung too far. As you hint at, nowadays there's too little protection for landlords against feckless and dishonest tenants, and the current shower masquerading as HMG are unlikely to do anything to remedy that situation.

It's not easy to fathom just how British politics has descended so low as to be an exercise in choosing the, marginally, less bad bunch of liars, incompetents and clowns.....😯

@CarlS1986

Yes, I think there would be a lot to consider before investing in a rental property in the UK, just as there is in Bulgaria. I really don't see the single apartment we'd be able to afford as likely to produce a great deal of income when tax, expenses, and maintenance are factored in. Not to mention having to pay a local agent to manage the property. I have seen and heard of some truly disastrous results with agent-managed properties that weren't managed at all! Good tenants need legal protection from dodgy and dishonest landlords, but unfortunately there's very little protecting good landlords from dodgy and dishonest tenants and agents.

@JimJ  I imagine the rubber boat market will remain robust for some time to come, though you're quite a distance from the sea there!

It's the precarity of rental income that bothers me. Buy at the right price and there's probably still excellent potential for capital gain, even when tax is factored in. But I'm not sure the heady days of rapidly rising prices where someone with a little cash to invest could buy at auction, do nothing but paint it magnolia and whack in the cheapest possible new kitchen and bathroom, and flip it for far more than the money spent, will return. Probably still possible if one is placed to pay cash for suitable properties when the bubble first bursts, has good contacts, and knows the market very well.

Sadly, most of us are none of the above. Many of us are risk-averse and of an age where we want income rather than potential future capital gain, usually a longer -term game. The problem is there seem to be very few (maybe no?) low-risk investments that give a better ROI than inflation.

@JimJ

Bubble talk is very negative, and I'm not sure that it's justified based purely on a 2024 upswing looking similar to the 2006 one. Of course, I agree that a global crisis in 2026 (World War III, maybe) would definitely cause a local crash, so that you could say I Told You So... and, if you haven't been nuked, and banks still work, you'll be able to snap up some bargains. :-)

However, on the flip side, it's very hard to time the market and put your money in after a bubble pops (ideally when it's completely deflated, and just about to get re-inflated). This applies to property and the stock market. While there have been many ups and downs, the long term trend has definitely been up. And most folks who sit on the sidelines for fear that the sky will fall in imminently, can end up missing out on substantial growth.

More importantly, for those folks lucky enough to have savings, or are managing to save from their income, they have to put it somewhere, right? Most savings accounts are "safe", but pay little interest... and when you consider inflation you're probably losing money in real terms. My parents stuck 20 grand in Premium Bonds (Government backed, super safe) over 20 years ago. They won a few hundred in prizes, and the account still had 20 grand... but they'd need 40k just to keep up with retail price inflation!  Shares and property tend to match or beat inflation, and (at least in the UK and USA) property inflation is far higher (maybe by several times) than retail price inflation.

This is such an interesting discussion! I know very little investment wisdom, so little, I spent the first twenty years of my adult life in a cycle of growing debt, living ultra-frugally to pay off the debt, getting back into debt again. It wasn't till my early 40s I started developing even the slightest amount of financial common sense.

Back in the early 2000's, when I was just starting to get financially more sensible, I used to read a finances forum. Their resident property expert forecast an imminent property price crash. He was so sure the market had peaked that he sold his house and moved his family into rented accommodation, ready to snatch up the cheaper properties after the crash. His advice was that everyone who wanted to make a killing on the property market should do the same. No doubt, he's still waiting in that rented property! Despite some short periods of price corrections, properties in our area are now selling for 2.5 to 3 times what they were then.

Over time, if one can ride out the dips that do occur, property and shares have historically been way better investments. Gold, too, though I suspect if there's some economic disaster and everyone's trying to sell at once, that value will crash, too. But it does feel risky, because of those inevitable dips, which mean little in the long term but can feel huge when they happen. And the picture is looking similar to how things were prior to previous crashes, both in the UK and Bulgaria.

The problem is that with investments, safety and returns are almost always inversely proportional. And the question of buying a property for income is different to buying for capital gains to buying to live in.  @cyberrescue1 asked the question because his pension pot no longer feels as safe as it did. But wisely, he's considering carefully before jumping from one risk to what is likely to be an even bigger one. Hubby and I will need to make that same decision when we sell our UK house.

@janemulberry

Sorry for my belated reply, had my hands full the past few days.

I've read with great interest everyone's thoughts and comments.

Whilst I'm still worried about the plight of my private pension pot, my thoughts are to stick with it for the moment.  The investment company that manages the pot, is having a Zoom meeting, the day after the budget, so will hopefully hear what they have to say.

Our Airbnb apartment is just 8 minutes walk from our home apartment, so I manage/clean/maintain it myself and my wife does the laundry.  I would certainly need to employ someone, if I were to add more properties, which then tales a chunk from the income, let alone the other issues of checking the work is done satisfactorily.

We've done well on.our properties here in Varna, bought just before they started rocketing upwards - +55% on our home maisonette, 40% on the Studio (airbnb) and 53% on our two garages.

@cyberescue1

Excellent buys!

I hope your fund manager has robust solutions for any possible challenges the budget creates.

@cyberescue1
Excellent buys!
I hope your fund manager has robust solutions for any possible challenges the budget creates. - @janemulberry

I'd be fairly comfortable saying that the fund manager has his own a*s covered against all eventualities.... 😎

@JimJ

You, cynical? You surprise me! 😉

@janemulberry

My brother and I use A J Bell,  who are highly regarded.  When my brother (who lives in London) first told me about them, I have to admit, I was skepitical, as there are so many scams in the UK and I honestly hadn't heard of them. I looked them up on Trustpilot and, indeed, they have excellent reviews.  We both use Evelyn Dart (Evelyn Partners) as pension administrators, who are also excellent.  A far cry from what we had before, dealing with a company in Salisbury, that was highly inefficient and unreliable, so.much so, it took four months to transfer everything to Dart / A J Bell.  Considereing the current world economic climate, they're certainly doing okay with my pension investments,  but I guess I'm a worrier, which I think is justified.

@janemulberry

Yes, the buys have certainly been great for us and I have to say, it was more luck in the timing of when we bought them, as I was relying on the payouts from my compensation claim (which took three years) and an.inheritance payout, which was also delayed, due to probate and tax issues that the solicitor encountered.

As Gwyn says, it's not easy to time it right, but I think property is pretty sound in the longterm, save for if war were to happen.

@gwynj

After the UK Budget, I'm okay with continuing my pension. As per usual, the mainstream media hyped up what the Budget could contain, which, a lot of what they forecast, didn't happen.

As for the Bulgarian property market, I'm happy with my investments so far,.but of course, prices could also go down. However, it seems in cities, demand is outstripping the number of properties available, as building work can.be tediously slow. A couple of years back, I enquired about apartments in a new block being erected nearby where we were renting at the time (Chaika area of Varna).  The block took an age to be completed and was only completed towards the end of 2023, after three years of construction.  It contained 76 apartments and 12 offices / retail units.   To my astoundment, every single apartment was sold before the foundations had been laid!  As it transpires, this seems common in Varna and I would imagine the same happens in Plovdiv, Burgas and Sofia.  So, whilst there's demand, I don't see property falling.  The big question is will the demand continue?  Ukrainians were a significant factor in the increases of the last two and a half  years,  both in the rental and sales markets.  A lot of Western Europeans want to settle in.Varna, as do some Canadians and Americans, but many are now being out-priced and are having to buy outside of the city, in other towns. So we will see.

My pension investment is run under a selection of risk packages, which I chose level 3 of 6 - medium risk. I.might move it to 4 if and when things look like they're improving.

I will certainly look forward to my State Pension, however I'm a few years short of contributions,  so I'll get 90% of the full pension.  Im not able to afford the unpaid contributions at the moment, as.much as I think it would be a good thing to pay them. I'm sincerely hoping I'll get the increases, although there's been talk of this stopping.

My pension investment company and pension administrator both have apps, which I can see all the daily activities of buys, sells, pay outs and dividends. A far cry from the previous administrator, where was investing blind.  The current investments are diverse:  stocks, shares, gold, bonds over the entire world.

I shall have to consider trying to make some money online.

@cyberescue1

I'm glad things still look relatively okay with your private pension! I suspect rather than a crash in property prices with a bursting bubble, more likely price growth will merely flatten. This is already happening to an extent, with the rate of growth slowing. Articles in the global press talking up Bulgaria, like the ones Gwyn referred to in a separate post, will push demand for property in the cities, and as you said, then there's the knock-on effect of some expats and unfortunately also locals being priced out of the cities and looking at nearby towns instead. One thing that might have an effect is that when the war ends there may be a movement of Ukrainians back home. But after so long many may feel settled and decide to stay where they are, so it probably won't result in a sudden rush of properties appearing on the market. But there may be a period of property price growth lagging behind inflation, as I believe is the case in the UK at present.

I'm the same with the NIC shortfall, and never having been registered as self-employed but having taken time off work as unpaid sick leave and as an unpaid caregiver (but not claiming any benefits, just living off savings) the amount to pay to make up those is quite a chunk! It may well be a good investment for the longer term, but it's an ouch to pay out rather a large sum now in hope that future British governments will continue to abide by the withdrawal agreement. I'll have to do it, because I'm also in the awkward situation of half my working life being in Australia. I get those years of paying tax counted as NIC years while I remain in the UK, but lose them if I move to Bulgaria. So I do need to maximise what I will potentially be paid, and pray the government sticks to the agreement!

@janemulberry

You can change your status to self-employed at any time. Once you have, you could ask again again about filling any gaps, and at what cost. I was employed until I left the UK, and my contributions were employed NICs. But I changed my status, and then paid my gaps/extra years at the Class 2 rate (3 quid per week, ish). I did it years ago, so I have no idea if it's still possible. But it's a massive bargain, so I can't see it hurts to try.