Pensions Planning: The NUMBER

hugheskevi

Pat38493 said:

LL_USS said:

@DT2001 we seem to consider a similar plan - giving away capital sooner rather than later and downsizing to a smaller property as soon as I have an empty nest. Just have to find a way to present the capital giving-away as a mix of gift + loan so my soon-to-be grown-up children still feel like it's (mostly) my money and they need to work hard as everyone else and as I did, whilst they wouldn't have to sell the house if something happened to me leading to a helfty IHT.

We have been trying to downsize to an lower cost property a bit further away from the City for about 8 months - so far we have had significant interest and viewings, and even some theoretical offers, but nobody who is actually in a position to proceed - it can take a long time I guess.

I'm in the middle of buying an expensive (for the area) property in the north west and selling a cheap (for London) house.

There has been quite a consistent story across the places I have viewed and the estate agents I have spoken with. Following the interest rate rises, a lot of people who already owned property and who might have otherwise purchased somewhere more expensive just remained with the property they had and neither sold nor bought. At the same time, there has been a decline in investment buyers too due to regulation and tax changes

That meant it was very likely first-time buyers would now purchase my London property (which is what has happened, within a few weeks as it was appropriately priced and presented to sell quickly), whereas previously it would have been 50/50 whether it was a first-time buyer or not. 

On the more expensive (relatively) properties I was viewing in the north-west, I heard stories of lots of interest, but problems around buyers being proceedable for one reason or another. Perhaps that is also caused by similar difficulties of a lack of buyers and sellers who already own their own home, leading to it being difficult to get into a proceedable position to purchase an expensive property.

MarriedWithKids89

Hi all, here is our (couple, retired, late 50's, no dependents, no pets, non-smokers, mortgage free, MCOL area) year end spending summary (living fairly comfortably doing what we want when we want without being extravagant):

Subsistence: £16714 (groceries, fuel, utilities, insurances, taxes, etc.)
Luxuries: £14534 (holidays, short breaks, days out, meals, takeaways, etc.)
Non-discretionary CAPEX: £12435 (car/home repairs, white goods, furnishings, unexpected bills, etc., including £10000 wedding expenses)

If you have any questions then please feel free to ask. Happy New Year.

DT2001

LL_USS said:

@DT2001 we seem to consider a similar plan - giving away capital sooner rather than later and downsizing to a smaller property as soon as I have an empty nest. Just have to find a way to present the capital giving-away as a mix of gift + loan so my soon-to-be grown-up children still feel like it's (mostly) my money and they need to work hard as everyone else and as I did, whilst they wouldn't have to sell the house if something happened to me leading to a helfty IHT.

Our children have, so far, shown a willingness to budget carefully. I do not think a gift will disincentive and hope it will just give them a good base on which to build. The other alternative is the possibility of paying IHT at a higher marginal rate with the loss of RNBR. 

A loan would be inside your estate but it could be reduced annually/biannually or whenever to remove from your assets(PET) whilst potentially being linked to whatever target you want 

DT2001

MarriedWithKids89 said:

Hi all, here is our (couple, retired, late 50's, no dependents, no pets, non-smokers, mortgage free, MCOL area) year end spending summary (living fairly comfortably doing what we want when we want without being extravagant):

Subsistence: £16714 (groceries, fuel, utilities, insurances, taxes, etc.)
Luxuries: £14534 (holidays, short breaks, days out, meals, takeaways, etc.)
Non-discretionary CAPEX: £12435 (car/home repairs, white goods, furnishings, unexpected bills, etc., including £10000 wedding expenses)

If you have any questions then please feel free to ask. Happy New Year.

Happy New Year.

Is the whole of your expenditure covered by income or are you utilising capital (pre SPA) before your luxuries spend reduces (if the U curve research is to be used for planning)?

kimwp

I was curious about the PLSA numbers, so took a look at the 2023 report (numbers reproduced below - weekly numbers for a single person). I only took a quick skim through the report, but they seem to be generated on the basis of what groups of members of the public around the country determine a minimum, moderate and comfortable life to consist of. It's an interesting read.

	Minimum	Moderate	Comfortable
Food	67.65	125.37	159.79
Alcohol	6.63	13.55	16.35
Clothing	9.52	23.97	23.97
Water rates	8.06	8.24	8.24
Council tax	20.68	27.63	27.63
Household insurances	1.73	4.12	4.12
Gas & Electricity	32.77	56.74	56.74
Other housing costs	2.01	22.99	24.9
Household goods	21.21	43.97	70.77
Household services	10.76	14.98	41.4
Personal goods and services	30.68	41.74	47.15
Motoring	0	79.76	92.33
Other travel costs	12.93	6.97	8.89
Social and cultural participation	51.62	131.15	244.17
Weekly Total	276.25	601.18	826.45
Annual Total	14365	31261.36	42975.4

https://www.retirementlivingstandards.org.uk/2023_research_report.pdf

SouthCoastBoy

Is this for a couple or single person?

kimwp

SouthCoastBoy said:

Is this for a couple or single person?

Oops, sorry, single person. I'll dig out the numbers for a couple.

LL_USS

Pat38493 said:

We have been trying to downsize to an lower cost property a bit further away from the City for about 8 months - so far we have had significant interest and viewings, and even some theoretical offers, but nobody who is actually in a position to proceed - it can take a long time I guess.

One downsized, we plan to have some money set aside to help the kids if they need it at some point in future.  However if we urgently needed this money for some other unforseen and unavoidable purpose, out needs would take priority.

Good luck with your move @Pat38493. I think I will give it a year for all the selling - our house should be taken up fast yet we never know our luck. I already have our old flat where we lived in the past to move back to, so I'll do up the flat whilst putting the house on the market.  You are right, we should not deprive ourselves for the children - we just need to have some careful planning.

LL_USS

DT2001 said:

Our children have, so far, shown a willingness to budget carefully. I do not think a gift will disincentive and hope it will just give them a good base on which to build. The other alternative is the possibility of paying IHT at a higher marginal rate with the loss of RNBR. 

A loan would be inside your estate but it could be reduced annually/biannually or whenever to remove from your assets(PET) whilst potentially being linked to whatever target you want 

Thank you @DT2001. The chance is my kids won't seem to stay in the same city so I am thinking of selling my house to raise the money, after both of them have left (I will move back to my flat where we lived before). When we sell the family house then gift/ loan money, residential nil rate band does not apply to this capital (unless I gift the house first then let them sell - but this is not as straightfoward because I don't give away the whole value of the house as I maintain a part of the capital as loans). I will need to survive 7 years for the gifts to be exempted from calculation for IHT.

Could you please explain a bit more about "reducing annually/ biannally/ whenever" (is it by gifting more or you mean by the kids paying back a part of the loan), and "remove from assets" and "linked to whatever target". I could have missed something important here.

LL_USS

@kimwp thanks. I have not seen this report but the numbers are very much what have been used across other sources. Minimum £14.365 for a single person, and the full state pension falls short of this number.