Financially assisting a parent to retire

jamesd

I wonder how she shops. Does she use discount places like Aldi or Lidl or wholesale clubs? If not it may well be worth finding which non-perishable things she likes from them which can be bought in bulk two or three times a year to save money and you could help her with that.

One thing I do is buy meat in bulk when the prices are low and freeze it. It's so expensive for some types that buying extra freezer space, say a big upright freezer, can really pay.

MK62

Without knowing the exact numbers involved, it's hard to for anyone to offer you much more than a few ideas here really.

The pension contributions from savings is obviously a good idea - however, there's only so much that can do - if she retired now and implemented that plan at a withdrawal rate of "a couple of hundred" per month, the plan would likely last around 10 years at £200pm.....at £300pm, it would likely last just 6 years or so. The plan also relies on her ring-fencing all her savings to use as contributions for the plan - would she be happy doing that?
Personally I'd be careful with P2P....not saying I wouldn't do it, but I'd make sure I understood exactly what you were putting your mum's money into - and perhaps resist the urge to go for the highest rates (which are obviously the biggest risk).
I'd probably use one of the larger, more established players myself too (though that in itself offers no real guarantees of course).
This very site has a section on P2P, so there's a start.

Then it would be down to the level of assistance you can offer....your own circumstances could change over the years, so I think you'd need to make whatever arrangement permanent from the start (as your mother could then be reliant on you, it would be a body blow to her if you were unable to continue for any reason, many of which could be beyond your control).....but again be careful....make sure you've exhausted all avenues of state assistance before committing.....it'd be a shame if your mother's access to this or that assistance etc was then scuppered by your assistance plan.

Discussions like this, around family finances, can be difficult, and I fully understand the situation of your mum not accepting a "handout" (as she sees it anyway) - I think this might be where your need to exercise your salesmanship, and "sell" it to her as something else......if you can.

kidmugsy

I return to my song about pension deferral. Consider:

(i) Find an equity release mortgage that would (a) let her draw the money out bit by bit rather than all in one go, and (b) allow her to pay back capital when it suits. Thus equipped:

(ii) Take the chance to raise the issue by discussing the wonders of pension deferral.
(ii) Suggest that she consider equity release to let her afford to defer (and stop working).
(iii) Point out that the equity release will be temporary because she can pay it back when the inheritance arrives.

jamesd

MK62 wrote: »

The pension contributions from savings is obviously a good idea - however, there's only so much that can do - if she retired now and implemented that plan at a withdrawal rate of "a couple of hundred" per month, the plan would likely last around 10 years at £200pm.....at £300pm, it would likely last just 6 years or so. The plan also relies on her ring-fencing all her savings to use as contributions for the plan - would she be happy doing that?

That's not how the basic plan works. It's pay in 2880, wait two to three months for the tax relief to arrive, take out 3600, use the 720 gain to add 60 a month on average to spending power.

wjr4

jamesd wrote: »

That's not how the basic plan works. It's pay in 2880, wait two to three months for the tax relief to arrive, take out 3600, use the 720 gain to add 60 a month on average to spending power.

2-3 months for the tax relief to arrive - blimey, who are you using?! Ours is instant!

MK62

jamesd wrote: »

That's not how the basic plan works. It's pay in 2880, wait two to three months for the tax relief to arrive, take out 3600, use the 720 gain to add 60 a month on average to spending power.

Must have missed that post.....;), but even so, £60pm isn't enough, not unless you also detail the plan to raise the other £140pm from the remaining c£17000.

Regardless of how you slice the cake, the outcome is either not enough income, or the income won't last long enough.
Unfortunately, £20000 will not deliver £200+ per month, reliably, for what could be 15-20 years or more, no matter what you do, even after you add the c£5000 of tax relief available until 75 (OK, that's an assumption on my part that by "late 60s", the OP means 68, or thereabouts)

Fair enough, it could be said that the inheritance should arrive at some point in the next 10 years.....however relying on that could be a big risk....a lot could happen over that period.
Hence, some form of assistance is required, preferably upfront (for reasons already mentioned)

Locoblade

jamesd wrote: »

Just gross salary and the gross (after tax relief) contribution limit is the higher of 3600 or gross pay.

So, is her pay more than 3600? More than 4000?

If no, or if it'll never be above 4000 again, forget about triviality/small pots rule. She can pay in and take out each tax year. Extensive discussion at Paying £2880 into pension when retired.

......

Also worth checking that her employer isn't deducting NI from her pay. Occasionally employers don't stop that when someone reaches their state pension age.

Many thanks, she's self employed so hasn't been paying any NI, current income is around £4k but would drop to between £2k and zero depending on whether she cuts down to a few hours per week or stops completely.

The more I think about it, the more I think paying into a pension and drawing back off it could be be a good compromise if she didn't want to accept money from us at this time and was prepared to slowly drop her overall savings over time.

Having dug out my old favourite Excel and created a spreadsheet, if she cut down to a morning a week which I don't think she'd mind (as she works for a friend on that day) then put £2880 from her savings per year into a pension to get the £720 tax rebate until she's 75 (~7 years), she could then draw £200/month back out to cover the defecit of reducing her hours, leaving the savings depleting by £2880/year but the pension growing by a net £1200/year up to 75 which could be invested to hopefully grow a bit over time. By my calculations even without any investment growth she could continue drawing £2400 for a total of 11 years and turn £20k savings into over £26k of pension income (£2400*11), do those figures look about right? We could always then re-visit us offering assistance at that time if her financial position hasn't changed by then.

I'm assuming a normal pension product such as an HL SIPP would be suitable for this?

Locoblade

jamesd wrote: »

It seems likely that she reached her state pension age before 6 April 2016 so would get an increase of 10.4% for each year deferred, inflation-linked for life.

Is she getting the maximum basic state pension as part of the total state pension? The other parts are additional state pension (the earnings-related bit) and sometimes a little graduated retirement pension. Occasionally we find that there's still a chance to buy old years, even more than six years ago, and get an excellent value for money increase.

She's 68 (born in '49) so gets the basic state pension rather than new state pension I believe? From my chat last night she actually gets about £60/month under the full state pension so she obviously didn't quite max out her NI contributions previously. She also doesn't actually qualify for Additional State Pension presumably because her savings including premium bonds etc are a little higher than I thought when I did the online calculator so not sure if either of those bits of info changes anything dramatically, i.e could voluntary NI topups an option?

Mojisola

Locoblade wrote: »

She's 68 (born in '49) so gets the basic state pension rather than new state pension I believe?

From my chat last night she actually gets about £60/month under the full state pension so she obviously didn't quite max out her NI contributions previously.

As was mentioned earlier, have you looked at whether she could claim Pension Credit?

Locoblade

Mojisola wrote: »

As was mentioned earlier, have you looked at whether she could claim Pension Credit?

Sorry I used the wrong phrase above, she doesn't qualify for Pension Credit (I wrongly said Additional State Pension) due to her savings. Not actually sure what Additional State Pension is or how we'd check if she was eligible for it?