Am I missing anything or making a mistake?

dlk

My father in law has just been made redundant but fortunately he is only 4 months from turning 65 anyway. He's asked for a little bit of advice but I didn't want to steer him in the wrong direction so asking for a second opinion.

He will qualify for full state pension and his wife who is already retires is in reciept of hers.

He has a stakeholder pension with £80k in and savings of around £20k (plus redundancy soon of £3600.

What we have considered is him buying his council house as it's worth about £100k so would only cost him £35k (he's lived the for 35yrs). This would use the £20k pension lump sum and £15k of savings but mean he'd no longer have £65 per week rent to pay and there's no way the £35k could buy him £65 per week

The main crux of my question is checking that he wouldnt lose anything by buying the house such as pension credits or housing benefit etc. I dont think he'll qualify for things like that anyway but wanted to double check.

Any devils advocate advice as to why my possible suggestion might be wrong is welcome.

atush

It sounds like a good idea to me, but as for the benefits aspect I am not sure. i'd ask on the benefits forum?

To see if A- they would qualify for anything, and B if anything they qualify for would be affected.

p00hsticks

dlk wrote: »

He will qualify for full state pension and his wife who is already retires is in reciept of hers.

How much exactly ? The 'basic' state pension is £115.95 but he or she could be getting considerably more than that via Serps or State Second Pension - you need ot find out to be able to do the sums.

dlk wrote: »

The main crux of my question is checking that he wouldnt lose anything by buying the house such as pension credits or housing benefit etc. I dont think he'll qualify for things like that anyway but wanted to double check.

House owners can't claim housing benefit, so the potential for that disappears. I don't believe Pension Credit would be affected, although from the sound of it they'll probably be getting too much to qualify anyhow. The benefits board would be a better place to ask.

dlk wrote: »

Any devils advocate advice as to why my possible suggestion might be wrong is welcome.

I'd just add - make sure that they/you are comfortable with the idea that they'll be responsible (both financially and practically) for the ongoing maintenance of the property if they buy. Are they the types that ring up the council as soon as the slightest thing goes wrong , or are they ok with the idea of doing their own DIY/ decorating etc or paying someone to do it ? And sorting out things like regualr boiler servicing etc....

atush

And add to that the cost of home owners insurance. Get a quote now as if they owned it.

But given they would instantly have 65K in equity to use in future if required, it still sounds like a decent idea.

dlk

Thanks both of you. As Poohsticks says I need to get full info about pension etc as I've looked briefly online about council tax and housing tax benefit and need to make 100% certain they won't qualify if they don't buy.

kidmugsy

dlk wrote: »

there's no way the £35k could buy him £65 per week

There is one. Deferring his State Retirement Pension would bring him in slightly more than that. However, it wouldn't give him £65k at the taxpayers' expense so it's probably second best as a a prime way to invest his savings.

I suggest they enquire how they can buy the council house and hold it as "tenants in common" e.g. each would own half. This is different from owning it as "joint tenants"; the former might have advantages if one of them eventually needs "care". If in doubt they could consult a solicitor - that might be money well spent and they'll presumably want a solicitor to look after their interests anyway if they do buy the property.

P.S. If he wants to get out some of the remaining £60k of the stakeholder without paying tax on it, he could anyway defer his state pension for, say, a couple of years, and withdraw enough from the stakeholder each year that his total taxable income equals the Personal Allowance for income tax (£10,600 p.a. at present). When he starts his state pension it will have increased by 10.4% for each year of deferral (and pro rata for shorter periods) and he'd still have some emergency money left in his stakeholder. If £10,600 were a larger annual sum than his state pension will bring in, he could always bung the excess into some other savings e.g. an ISA or a high interest current account.

He'd have to be careful though: property owners need more of an emergency fund available than tenants do.

And pension deferral can also interact with various doles, so he'd need to check that too.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf

xylophone

In very basic terms, Pension Credit tops up weekly income to £230.85 for a couple but full details are here.

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

Has your father in law received a state pension statement?

It is likely that he has additional state pension on top of his basic state pension and this, together with his personal pension and his wife's pension would probably put them over the threshold?