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

domjon1

Malthusian wrote: »

154 / (154 + 159) = 49% = roughly half her income. If the real value of the £154 joint annuity is reduced by 2.5%pa over 20 years, then it becomes 92 / (92 + 159) = 36% = just over one third of her income. What am I missing?

I assumed the £159pw was her State Pension but is there another source of income?

The annuity figure is a monthly payout figure, the state pension weekly. I probably should have normalised everything to either weekly or monthly to avoid confusing people tbf.

So you see at £154 a month it becomes far less significant. Less still if they take the 25% lump sum obviously.

Small beer, hence me starting the thread with the idea of effectively converting it to an inflation-protected £375 a month via Right To Buy...but as has been pointed out, as technically sound as that might seem it...it doesn't seem to be the best practical course of action in the real world.

Malthusian

Gotcha, apologies for missing that.

I still think the difference between the single and joint life annuities is a relatively small price to pay for knowing that the £155pm is there for life. When you are living on a low income, even an extra £40 a week will be missed.

madeinireland_2

I went through all this with my own FIL a few years ago. They eventually took the step but it was a couple of years before they retired.

After buying the house a while later they sold it (it was in a pretty poor council estate) and made enough money to purchase a new fixed mobile home on a nice estate with other residents who were also retired.

They say to me now it was the best thing they ever did and have lots of friends of a similar age living alongside them and they are now involved in so many clubs. It has certainly brightened up there remaining years although their health is now starting to deteriorate. Having their current property and other friends around has made it so much easier for them to manage with their health problems.

I'm sure if it had all gone wrong I would have taken a lot of flak but to my relief it seemed to go ok - although to be fair if it did start to go wrong we would have been in a position to step in and help if required.

domjon1

Malthusian wrote: »

Gotcha, apologies for missing that.

I still think the difference between the single and joint life annuities is a relatively small price to pay for knowing that the £155pm is there for life. When you are living on a low income, even an extra £40 a week will be missed.

Lets put the figures in to your rough calculations though. And lets assume they take the 25% tax free lump sum (FIL has apparently agreed to transfer it straight to an account only MIL has access to)

A non-escalating single annuity guaranteed for 20 years would then pay iro £130 per month, £30 per week

30/(30+159) = 15%

accounting for 2.5% inflation average over 20 years...

18/(18+159) = 10%

So maybe £12 a week worse off when she's 80 and only needing to food shop for one/eligible for single person council tax discount etc ect

Granted the upside in the short term compared to a Joint Annuity would only be iro £16 per month.

Or they could just grown some balls and buy the damn house :rotfl:

domjon1

madeinireland wrote: »

I went through all this with my own FIL a few years ago. They eventually took the step but it was a couple of years before they retired.

After buying the house a while later they sold it (it was in a pretty poor council estate) and made enough money to purchase a new fixed mobile home on a nice estate with other residents who were also retired.

They say to me now it was the best thing they ever did and have lots of friends of a similar age living alongside them and they are now involved in so many clubs. It has certainly brightened up there remaining years although their health is now starting to deteriorate. Having their current property and other friends around has made it so much easier for them to manage with their health problems.

I'm sure if it had all gone wrong I would have taken a lot of flak but to my relief it seemed to go ok - although to be fair if it did start to go wrong we would have been in a position to step in and help if required.

What's frustrating is that if I'd have stuck my nose in 5 years ago and dissuaded FIL from needlessly cashing in his DB pension early they would be in a much more comfortable position to attempt it now. Seems its an equal risk to get involved or to not get involved.