Pensions advice on the new changes 2014

jamesd

With that amount of money in investments and no experience you should pay an IFA and maybe ask for opinions from people here to confirm that the advice is reasonable.

If I was doing it I'd start with things like this:

• Invesco Perpetual Distribution. For direct income.
• Invesco Perpetual High Income, Income units. For direct income and inflation cover.
• Some property fund that holds properties directly. Maybe the SWIP one. For direct income, not from bonds.
• Vanguard Global tracker ETF (or fund, cheapest wherever you hold it). For long term inflation cover.
• Cash in savings accounts equal to one or two years of the investment income. Partly to smooth it within the year and partly as a buffer for income drops.

Not in even proportions, and I'd really want to use a dozen or so funds.

If you just want a property base to live in sometimes, do big area searches for low prices and you can find some very low priced places. Particularly in say the Welsh valleys or NE England. But even outside cities outside the south-east of England will offer places in the £40-£50k range at times. Maybe buy with a mortgage while you're still working.

One advantage to downsizing while working is that you can make more pension contributions using the money from the sale and get tax relief on pension contributions this tax year of your whole taxable income. Then you can get 25% of this back as a tax free lump sum and use the remainder for income. It's a nice tax gain.

You can do something like renting a place near work until you move on to wherever selling and the new place takes you.

whitejohn

bigadaj wrote: »

You could probably do better with invest nets but being inexperienced in investing and risk averse means that you wouldn't be compfortable with anything higher risk so were back on safe things with low returns.

Given that your still in good health have you looked at continuing to work in some capacity, its often good for people socially and mentally as well as financially. My father is still working at 78 and would be bored stupid if he didn't.

Downsizing may be good, if I were you I would buy a smaller property rather than rent for ten security this brings, though a problem woud be that you might miss out in means tested benefits with say £80k until this falls to below fifteen grand or so.

Given no dependents then you could also have a look at equity release though the terms may not be suitable and the money you might get would be low as you are relatively young for this.

I am still working self-employed but work has dried up with the recession. I'm otherwise very fit, have a vast range of skills and I'm hard working and very enthusiastic. Just cannot seem to make any money! I'm wondering if I could maybe buy a house at the right price do it up and sell at a profit, using my DIY skills. I did look at equity release but seemed to be a very poor deal.

xylophone

I'm otherwise very fit, have a vast range of skills and I'm hard working and very enthusiastic.

Had you thought of looking for a live in job that would utilise your skills?

You might then think of buying (say) a one bedroom flat in an area convenient for commuting, shops etc that you could rent out while you were working and then use yourself when you retire?

You could then defer the state pension if you wished, or take it and reinvest the income in your private pension pending full retirement?

whitejohn

jamesd wrote: »

With that amount of money in investments and no experience you should pay an IFA and maybe ask for opinions from people here to confirm that the advice is reasonable.

If I was doing it I'd start with things like this:

• Invesco Perpetual Distribution. For direct income.
• Invesco Perpetual High Income, Income units. For direct income and inflation cover.
• Some property fund that holds properties directly,. maybe the SWIP one. For direct income, not from bonds.
• Vanguard Global tracker ETF (or fund, cheapest wherever you hold it). For long term inflation cover.
• Cash in savings accounts equal to one or two years of the investment income. Partly to smooth it within the year and partly as a buffer for income drops.

Not an even proportions, and I'd really want to use a dozen or so funds.

If you just want a property base to live in sometimes, do big area searches for low prices and you can find some very low priced places. Particularly in say the Welsh valleys or NE England. But even outside cities outside the south-east of England will offer places in the £40-£50k range at times. Maybe buy with a mortgage while you're still working.

One advantage to downsizing while working is that you can make more pension contributions using the money from the sale and get tax relief on pension contributions this tax year of your whole taxable income. Then you can get 25% of this back as a tax free lump sum and use the remainder for income. It's a nice tax gain.

You can do something like renting a place near work until you move on to wherever selling and the new place takes you.

Yes I think I will have to rent initially and then look around for something cheap to buy. Don't mind where I re-locate to and North East is fine for me. At least I will be a cash buyer and should get a good deal. I'm self employed and making a loss most years after claiming back my allowances so should not have to pay tax on the pensions. (losses to carry forward) I don't earn enough to pay any pension contributions, the pensions that I have, were frozen many years ago. I believe also that in a years time or so the personal tax allowance will be raised to £10K so that should help? I feel a bit safer buying and selling property as it's something I understand.

xylophone

Another thought - had you thought of registering yourself with your local Age Concern? With a range of skills (and a CRB check) you could be a godsend to the elderly requiring trustworthy, competent service at reasonable rates?

whitejohn

xylophone wrote: »

Another thought - had you thought of registering yourself with your local Age Concern? With a range of skills (and a CRB check) you could be a godsend to the elderly requiring trustworthy, competent service at reasonable rates?

Looking in to that thanks

whitejohn

jamesd wrote: »

It is worth knowing that deferring the state pension is currently a good deal, adding 10.4% to it for each year you defer, pro-rated for part of a year. If there's any way for you to afford deferring, like living off savings, it's likely to be to your benefit to do so for a year if you're a man in normal good health.

Deferring doesn't mean you'll get the new flat rate pension, though, that's based on when you reach state pension age, not when you take the state pension.

It's worth saying more about those frozen pensions. It's very important to do so if you have any health problems that might reduce your life expectancy. Whatever else you do, don't automatically buy an annuity from the firm that has your pension pot, it almost always gets you a lower pension than you could get by having an IFA go shopping around for you, even after allowing for the cost of the IFA, normally paid for out of the pension pot value, not directly out of your pocket. Even without health issues the shopping around can get you 10%-20% more income each year for life from a good deal place rather than a bad deal one.

Just going back to deferring state pension, daft question. Is that a one off payment of 10% for the time it was deferred (say 10% of £5000 = £500 payment) or does the pension increase by 10% PA for future years (£5000 PA becomes £5500 PA after deferring for a year)

gardenia101

xylophone wrote: »

Another thought - had you thought of registering yourself with your local Age Concern? With a range of skills (and a CRB check) you could be a godsend to the elderly requiring trustworthy, competent service at reasonable rates?

Slightly off topic - but I would second this. I'm not retired but do have a visual impairment which has led to certain cowboys thinking they can rip me off far more easily than other people. I now wouldn't dream of employing anyone to do any work in my house that hadn't come with a recomendation from my local Age Concern branch. The local list holder is often giving out lists when I go into our local shop, so you could pick up a lot of work this way.

xylophone

Just going back to deferring state pension,

http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/@over50/documents/digitalasset/dg_200597.pdf

http://www.hmrc.gov.uk/pensioners/pension-later.htm

Bigmoney2

whitejohn wrote: »

I am still working self-employed but work has dried up with the recession. I'm otherwise very fit, have a vast range of skills and I'm hard working and very enthusiastic. Just cannot seem to make any money! I'm wondering if I could maybe buy a house at the right price do it up and sell at a profit, using my DIY skills. I did look at equity release but seemed to be a very poor deal.

Yes I think I will have to rent initially and then look around for something cheap to buy. Don't mind where I re-locate to and North East is fine for me. At least I will be a cash buyer and should get a good deal. I'm self employed and making a loss most years after claiming back my allowances so should not have to pay tax on the pensions. (losses to carry forward) I don't earn enough to pay any pension contributions, the pensions that I have, were frozen many years ago. I believe also that in a years time or so the personal tax allowance will be raised to £10K so that should help? I feel a bit safer buying and selling property as it's something I understand.

From what you've said about the pensions you will receive I'm not sure you will be above the tax allowance level anyway.

I would look at getting forecasts for state and frozen pensions and also look into pension credit.

If entitled to pension credit you may also be entitled to help with council tax.

I would see how you go before selling your house and renting as the procedes of sale would be classed as savings and could mean you loose any benefits you would otherwise be entitled to.

Regarding the doing up of houses, I think that is a definate possibility, if you decide you can't afford to stay in current house.

If you sell your current house to fund this and live in the house your doing up as your primary residence, then you wouldn't be liable for capital gains tax ( and there is a capital gains allowance as well) , and even a modest profit could be a good way of suplimenting your income while you are still fit enough to do so, maybe do one every 1-2 years.

https://www.gov.uk/pension-credit