Financially assisting a parent to retire

Locoblade

jamesd wrote: »

No, I've been letting my loans there just repay for years. Try Ablrate and Unbolted. Ablrate has an ISA, so no income tax, Unbolted doesn't, but use at least two places, better four or five. Those two are a good start, though.

She'll have both the personal savings allowance and the starting rate for savings to use as well, so interest should be free of tax for her even without ISA use.

Brynsam is right about the pension. 25% of the £3,600 is tax free, the remaining £2,700 is taxable income. In her case no tax on that either so £720 a year of free money until she reaches 75 and is no longer allowed to make pension contributions.

Thanks, I'll have a look at those. Is that pension thing something she can do every year up to 75 or just for a maximum of 3 tax years in that period as Brynsam suggests? Either way it's worth doing.

Locoblade

kidmugsy wrote: »

The best investment she can make - and probably a better investment than you can make - is to suspend her old age pension for about five years. When she restarts it it will be 52% bigger. You should check but I suspect that even then it won't fill her Personal Allowance against income tax.

She's only working enough hours at the moment to top up her pension, if she deferred it entirely she'd have to work a lot more for the next few years which is defeating the end goal of allowing her to enjoy her early retirement years.

Totally with you regarding formalizing it and keeping siblings etc informed and on side, we're pretty close as a family so wouldn't want to risk creating friction.

Brynsam

Locoblade wrote: »

Is that pension thing something she can do every year up to 75 or just for a maximum of 3 tax years in that period as Brynsam suggests? Either way it's worth doing.

Sorry, unclear post! Your mum can pay in up to £2,880 (£3,600 with tax reclaimed by the provider) or 100% of her earnings, if higher, each year until she is 75. She can 'cash in' a pot worth up to £10,000 on grounds of triviality and can do that up to 3 times.

25% of each pot is tax free. If she is on a low income, some (or all) of the rest of the pot will also be tax free, up to the personal allowance in the tax year in which she takes the cash.

atush

Locoblade wrote: »

She has around ~£20k in savings and a full state pension, she did the Pension Credit calculator and if she gave up work completely it would be about £4/week which isn't nearly enough.

Have you done a full MSE on her outgoings? she may, like many older people, not be getting the best deal on insurance, utilities etc. she could free up cash that way?

Locoblade

Brynsam wrote: »

Sorry, unclear post! Your mum can pay in up to £2,880 (£3,600 with tax reclaimed by the provider) or 100% of her earnings, if higher, each year until she is 75. She can 'cash in' a pot worth up to £10,000 on grounds of triviality and can do that up to 3 times.

25% of each pot is tax free. If she is on a low income, some (or all) of the rest of the pot will also be tax free, up to the personal allowance in the tax year in which she takes the cash.

Thanks, so just to ensure I'm getting it (it's me not you!), with no income from working she could pay £2880 annually from her savings pot into a stakeholder pension for the next 3 years to get that up to £10k (£3600x3), she'd then withdraw a £10k lump sum from the pension pot (which I guess would attract some tax in that tax year when added to her state pension income) then repeat the process another 2 times whilst she's under 75?

Locoblade

atush wrote: »

Have you done a full MSE on her outgoings? she may, like many older people, not be getting the best deal on insurance, utilities etc. she could free up cash that way?

Thanks, worth looking at but to be fair she's pretty astute at that kind of stuff, she gets all the regular money saving tips from this website and is always messaging me telling me the latest that Martin has said on TV about saving a few quid on utility bills etc, its just the bigger picture of making what money she has work for her better that she (and me to an extent) don't really have a handle on.

MallyGirl

Locoblade wrote: »

Thanks, so just to ensure I'm getting it (it's me not you!), with no income from working she could pay £2880 annually from her savings pot into a stakeholder pension for the next 3 years to get that up to £10k (£3600x3), she'd then withdraw a £10k lump sum from the pension pot (which I guess would attract some tax in that tax year when added to her state pension income) then repeat the process another 2 times whilst she's under 75?

she can only pay in till 75. She can take as long as she likes to draw it down again so no need to incur any tax if she keeps below the basic rate tax band for all income including pensions

Locoblade

Ah OK, got you

McKneff

How much does she actually need a month to live on . Considering she has no mortgage.

Locoblade

McKneff wrote: »

How much does she actually need a month to live on . Considering she has no mortgage.

A couple of hundred per month on top of her state pension, not a massive amount hence why the suggestions of using her savings to generate more income via p2p lending etc might work.