not enough to live on

Carolinemjs

Im 66 and in receipt of state pension of £125.67 my home is mortgage free and worth around £300,000, I live alone.
Obviously the pension doesnt cover my outgoings so for the past 3 years I've been topping up from my savings of about £50,000

I've been thinking about taking out a lifetime mortgage and in principle understand the ins and outs but I'm wondering why or if I need to hire a financial advisor to do this, or what other options are available to me.

I have no dependents or family to inherit etc
I have a part time job which generates between 0-£150 on a good week, maybe once a month.
I live in a rural location and would not consider a lodger as appropriate
Downsizing is not on the agenda in the foreseeable future, one can never be sure but I want to maintain the lifestyle I have, i.e. Living in the countryside and enjoying it.

Mojisola

Carolinemjs wrote: »

Im 66 and in receipt of state pension of £125.67

Any reason why you can't claim Pension Credit?
https://www.gov.uk/pension-credit/overview

Carolinemjs

Mojisola wrote: »

Any reason why you can't claim Pension Credit?
https://www.gov.uk/pension-credit/overview

Because my savings are above the limit - I just completed the form

greenglide

You could defer (suspend, stop recieving) your state pension for a while and live on you savings for a while. Each year you did this would increase your pension by over 10%. This is assuming your state pension age was before 6th April 2016.

What would be an income level that would work for you?

xylophone

Have you read through this very detailed fact sheet?
http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS48_Pension_Credit_fcs.pdf?dtrk=true

Presumably your capital is rapidly diminishing?

kidmugsy

Before the tax year ends consider contributing £2880 to a SIPP. (We use Hargreaves Lansdowne and find their service very good. I've seen other people here speak highly of Virgin Money for the stunt I am about to suggest.) The SIPP provider then claims tax relief from HMRC (even though you are not a taxpayer!) which increases the fund to £3600. Then you withdraw the £3600 making £720 profit (less any charges).


Caveats:

(i) with some providers (e.g. HL) you'd need to leave a bit of money behind to avoid paying the charge for closing the account. That's why some people favour Virgin Money.

(ii) The provider is obliged to subtract tax (using an emergency code) from the money being paid to you. So you'd have to phone HMRC to claim the tax back.

(iii) That's £720 pounds of profit, year after year, for remarkably little work. Note that you can contribute another £2880 as soon as the new tax year begins i.e. April 6th, and withdraw the £3600 as soon as HMRC has paid the tax rebate to your provider. The latter typically takes around 6 weeks or so.

(iv) Be careful not to make yourself into a taxpayer accidentally. Of the £3600 the taxable part is £2700. If you drew down the lot twice in the same tax year that would become £5400, which with your State Retirement pension (and any tax credit) would edge you into paying a bit of 20% income tax. That is best avoided.

Note that you can use this stunt in addition to claiming pension credit and in addition to deferring your State Retirement Pension. Think of it as part of spending down your capital but doing it in a profitable way.



P.S. I understand that any respectable provider of equity release will insist that you take financial advice. If I understand correctly, equity release gets a bit cheaper for every extra year of age, so you might like to start it just after a birthday. Note that the interest rate you will have to pay on your equity release will probably be less than the advantage you will get by deferring your State Retirement Pension. Yippee!

Silvertabby

I'd only go for the lifetime mortgage/equity release if you are reasonably confident that you will stay in your house for ever. Do you have any emotional ties to your house ? Would down-sizing free up some capital?

If not, then at least investigate that option. I know some people may chirp up and say to avoid equity release like the plague, because there would be nothing left for your children to inherit. You don't mention family, but if you do have children then I'm sure they wouldn't disagree with anything that meant that you don't have to spend your retirement watching every single penny.

Linton

From my investigations for other reasons, a lifetime mortgage may only provide about 25% (or less) of the value of the house for someone of your age. So it could be worthwhile delaying the decision for a few years.

It is worth talking to a specialist mortgage advisor if you are thinking of going down that route. It shouldnt cost anything to get a quote and have a discussion on exactly what is involved. Mortgages (unlike investments) still pay commission.

Mojisola

Carolinemjs wrote: »

Im 66 and in receipt of state pension of £125.67 my home is mortgage free and worth around £300,000, I live alone.

As you're only 66, have you thought about doing a part-time job or short blocks of temping?

Is downsizing a possibility?

If not, would you consider a lodger? Depending where you live, a Mon-Fri lodger could be a possibility - extra income but you have the house to yourself all weekend.

Carolinemjs

kidmugsy wrote: »

Before the tax year ends consider contributing £2880 to a SIPP. (We use Hargreaves Lansdowne and find their service very good. I've seen other people here speak highly of Virgin Money for the stunt I am about to suggest.) The SIPP provider then claims tax relief from HMRC (even though you are not a taxpayer!) which increases the fund to £3600. Then you withdraw the £3600 making £720 profit (less any charges).


Caveats:

(i) with some providers (e.g. HL) you'd need to leave a bit of money behind to avoid paying the charge for closing the account. That's why some people favour Virgin Money.

(ii) The provider is obliged to subtract tax (using an emergency code) from the money being paid to you. So you'd have to phone HMRC to claim the tax back.

(iii) That's £720 pounds of profit, year after year, for remarkably little work. Note that you can contribute another £2880 as soon as the new tax year begins i.e. April 6th, and withdraw the £3600 as soon as HMRC has paid the tax rebate to your provider. The latter typically takes around 6 weeks or so.

(iv) Be careful not to make yourself into a taxpayer accidentally. Of the £3600 the taxable part is £2700. If you drew down the lot twice in the same tax year that would become £5400, which with your State Retirement pension (and any tax credit) would edge you into paying a bit of 20% income tax. That is best avoided.

Note that you can use this stunt in addition to claiming pension credit and in addition to deferring your State Retirement Pension. Think of it as part of spending down your capital but doing it in a profitable way.



P.S. I understand that any respectable provider of equity release will insist that you take financial advice. If I understand correctly, equity release gets a bit cheaper for every extra year of age, so you might like to start it just after a birthday. Note that the interest rate you will have to pay on your equity release will probably be less than the advantage you will get by deferring your State Retirement Pension. Yippee!

The suggestions here seem to be the best options at the moment:-
1. Take out a SIPP before the end of the tax year
2. Check how much the tax would be if I repeat the process at the beginning of the next tax year
3. Check and compare the interest rate charged on equity release vs advantage of deferring state pension

State pension credit isn't going to be an option until my savings are considerably depleted down to £10,000

Thank you

Carolinemjs

Linton wrote: »

From my investigations for other reasons, a lifetime mortgage may only provide about 25% (or less) of the value of the house for someone of your age. So it could be worthwhile delaying the decision for a few years.

It is worth talking to a specialist mortgage advisor if you are thinking of going down that route. It shouldnt cost anything to get a quote and have a discussion on exactly what is involved. Mortgages (unlike investments) still pay commission.

Thank you for making the point about mortgages still paying interest!