Making the best of a bad situation..(Pension/Right To Buy)

silvercar

If the purpose is to provide decent income in old age, rather than worry about inheritance, would RTB coupled with equity release be an option? I'm thinking the equity release (which carries no monthly repayment requirement) would provide the capital to buy with the RTB discount. At least that would preserve the pensions.

*I may have missed something glaringly obvious.

Malthusian

With no disrespect at all, your FIL in particular sounds like the reason we have council housing. With his being an HGV driver they should have a decent joint income and could have purchased an £80k - £90k house long ago had they been so inclined.

If I was their son-in-law I would certainly mention the option over a cup of tea but I wouldn't consider arranging it for them.

cloud_dog

How many dependants are there?

Is it a possibility for dependants to club together to raise the money to purchase the house and gift it to the parents (an agreed rent could be paid if necessary), or could they stand as guarantors (if that might be required)?

domjon1

Malthusian wrote: »

With no disrespect at all, your FIL in particular sounds like the reason we have council housing. With his being an HGV driver they should have a decent joint income and could have purchased an £80k - £90k house long ago had they been so inclined.

If I was their son-in-law I would certainly mention the option over a cup of tea but I wouldn't consider arranging it for them.

Yeah I'm leaning towards something like that. I'll probably try to give them a simplified A4 sheet with the pro's and con's for each of their available options, I might even mention that the RTB option would be my own preferred option but without really emphasizing the point they're most unlikely to pursue it and will probably default to the most cautious available option.

Tbh it's the absolute least of my concern whether FIL has enough left over to go down the pub every day but I would have liked the MIL to be free of worry that the rent was getting paid each week and be guaranteed a bit of cash of her own to enjoy her retirement. But you can't live other peoples lives for them eh

enthusiasticsaver

The more I think about this the less I would be inclined to get involved. Your FIL is obviously a spendthrift and maybe your MIL has come up with this idea, presumably with your help, to avoid FIL getting his hands on the 25% tax free lump sum and wasting it as he did with the pension he has already frittered. How anyone can get to retirement age and still be clueless with money surprises me. It strikes me here that the key is to help your MIL get her security sorted. Leaving her with an asset which needs maintaining, no money to cover upkeep and a spendthrift husband sounds unwise. At least if she rents and FIL dies she will be eligible for housing benefit to cover rent and when her state pension kicks in she will be ok for income.

domjon1

cloud_dog wrote: »

How many dependants are there?

Is it a possibility for dependants to club together to raise the money to purchase the house and gift it to the parents (an agreed rent could be paid if necessary), or could they stand as guarantors (if that might be required)?

Just the 2, the son is in no position to help and my OH is tied up (along with me) heavily overpaying our mortgage.

It is a possibility for the near future though...our mortgage will be cleared in 4 years so if FIL was to pass in the next 5-10 years we could evaluate MIL's position re. benefits/threat of eviction and if necessary give her the money to buy the house then. That does offer me some peace of mind regarding her position tbh

domjon1

enthusiasticsaver wrote: »

The more I think about this the less I would be inclined to get involved. Your FIL is obviously a spendthrift and maybe your MIL has come up with this idea, presumably with your help, to avoid FIL getting his hands on the 25% tax free lump sum and wasting it as he did with the pension he has already frittered. How anyone can get to retirement age and still be clueless with money surprises me. It strikes me here that the key is to help your MIL get her security sorted. Leaving her with an asset which needs maintaining, no money to cover upkeep and a spendthrift husband sounds unwise. At least if she rents and FIL dies she will be eligible for housing benefit to cover rent and when her state pension kicks in she will be ok for income.

Yeah that's looking about right tbh.

Which raises the question of Annuitys again...with his private pensions being such a small proportion of his income and the bulk (state pension) already being inflation protected I was leaning towards non-escalating....from memory the ballpark figures were initial income of around £150ish a month level, £110 a month escalating. That would seem to be a big enough difference to make level the better option. The nagging worry about possible consequences of a Corbyn government does give me some pause for thought though. A valid concern or am I overthinking it for such a trivial amount?

enthusiasticsaver

What is their health like? I think my inclination would be level too given that the majority of their income would be inflation proofed. MIL would actually increase her income if she only earns £500. Does she not have an occupational pension?

domjon1

enthusiasticsaver wrote: »

What is their health like? I think my inclination would be level too given that the majority of their income would be inflation proofed. MIL would actually increase her income if she only earns £500. Does she not have an occupational pension?

Will be a trivial one if she does. Health is reasonable/average I'd say though the FIL has always been a drinker.

Even the simple things are complicated with this pension malarkey aren't they? I was approaching it from the perspective of definitely purchasing a 100% Joint Annuity but on reflection I guess I need to also consider the potential state benefit ramifications given a widowed MIL would be on a very low income. Might be preferable to just take a 10 year guaranteed single life.

Malthusian

domjon1 wrote: »

Which raises the question of Annuitys again...with his private pensions being such a small proportion of his income and the bulk (state pension) already being inflation protected I was leaning towards non-escalating....from memory the ballpark figures were initial income of around £150ish a month level, £110 a month escalating. That would seem to be a big enough difference to make level the better option. The nagging worry about possible consequences of a Corbyn government does give me some pause for thought though. A valid concern or am I overthinking it for such a trivial amount?

I am inclined the same way as you. Their State Pensions are inflation-proofed and taking a level annuity means you have more money when you are most able to enjoy it. The effect of inflation is balanced by the fact that activity and therefore spending generally goes down as you get older... except, of course, when you go into care, but at that point any additional income may well just be swallowed by means-testing.

They have very little to fear from a Corbyn government as they have very little money.

If they buy a single life annuity then it will nearly halve the income she will receive as a widow. As things stand she won't get any Pension Credit whether the annuity dies with him or not. Perhaps it would affect Housing Benefit, but even then I can't see the benefit of buying a single life annuity. The extra income while he is alive will disappear unnoticed. And it doesn't sound like she can just shrug off the loss of not just his State Pension but the annuity as well.