planning for death is expensive!

mrklaw

Bit of a bump. Had a look again as my general plan is now firming up for the retirement part.

Decided we wouldn’t need insurance on my wife, if I maintain the full DB then a simple reduction in spending should absorb the loss of the additional state pension. So I went back to the broker and asked for revised figures going as far out as they can - Aviva can do level payout Family Income Benefit to 90 which seems enough.

About £90 a month starting now for £12k a year ending at 90. realistically would only be needed from 67 when we start leaning on the state pension. But I’m guessing it’d be bloody expensive to take one out at 67 and I’d prefer to know the costs upfront..

so about £1k a year would avoid me having to potentially ringfence about £100k to self-insure. and that £1k a year will get more affordable as its fixed without rpi increase or anything. (I could gilt ladder it for £15k..)

Thinking about it I don’t think its about spouse protection - we can do that with the money we have. Its about tryign to be able to support our kids while we can be there to enjoy it with them I think. And for that the insurance effectively frees up about 100k.

anyone else done or considering this? I suppose its perhaps only relevant if you’re not having zillions and worrying about IHT more than having a measly 150k buffer :D

QrizB

About £90 a month starting now for £12k a year ending at 90. Realistically would only be needed from 67 when we start leaning on the state pension. But I’m guessing it’d be bloody expensive to take one out at 67 and I’d prefer to know the costs upfront..

With a fixed end date, I think it should get cheaper as you get older not more expensive?

Eg. in 5 years time, you'll have lived another 5 years without claiming and the maximum possible payout will be for 5 fewer years.

Aretnap

With a fixed end date, I think it should get cheaper as you get older not more expensive?

Eg. in 5 years time, you'll have lived another 5 years without claiming and the maximum possible payout will be for 5 fewer years.

Not necessarily. The risk of dying aged, say, 60 is very low compared with the risk of dying, say, aged 89. So if you start the policy aged 60 the first year's premiums represent something close to risk-free money for the insurance company. If you start the policy aged 61 instead, that money has to be added to and spread over the remaining years' year's premiums to make the maths work the same.

Intuitively I might expect the premiums to increase a bit at first as the risk of dying early in the policy increases, then decrease again as you get close to 90 and the total possible payout starts to really come down. Precisely what age is the "sweet spot" I don't know but you might be able to get an idea by comparing quotes on a price comparison site with different birth dates.

Of course, if the policy is a bit more expensive to take out when you're 67 rather than (say) 60, you have to balance the fact that the premiums are a bit higher with the fact that you're not paying them for an extra 7 years of cover that you arguably don't really need.

michaels

77k net from 90k gross sounds amazing!

We plan to use 'allocation' of some of my DB so the loss is only 1x SP (approx 60k gross joint to 50k single gross) but not sure how allocation works with taking pension early and 37.5% survivors pension.

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82100910#Comment_82100910

it all goes in circles a bit and I probably have to stop thinking about it.

I’m thinking to put aside a 50k buffer just to insure against old age generally (we’d be well under IHT) and I could slice the premiums off that. £100 a month will be like £30 a month by the time we’re 80 so in that sense inflation is working for us (but also eroding the value of the policy so we oversize it at the start anyway). Feels like a low enough cost to give us more flexibility with the rest of the savings

NormalNorman

My rambles…

I don't worry about care as there is nothing I can do to plan for it other than keeping fit and healthy. It's so hugely expensive I'll be living life as usual. Plus if there is no insurance product available to pay for care then there is no way a a lowly consumer such as I can make such provision. So if the house needs to be sold in the future then that's that. Do I care anyway when life has been lived? Talking about houses we would like to drop from five to two bed but the sort of thing we are looking for is rare. Also been gifting large amounts to daughter since she was born so the seven year rule/dpa is in the very distant past. .

Death however will happen and that's also expensive. Funeral, wake, probate [letter of confirmation], church costs, solicitors, death certificates, crematorium, valuations, donations e.g. cancer charity. The run up to death can be very expensive too.

Many things can be done to mitigate some of these costs, write down your funeral wishes, money set aside, simple finances, joint where possible, will, POA etc. For example I have one joint current account with the wife and zero trinkets that would need valuations. All credit cards and some savings accounts are with the same current account provider aiding with the one stop shop approach. After the stoozing days I no longer have dozens of accounts, just exactly what we need for simplicity and allows whoever to look back a long time frame.

Moonwolf

It helps us that I was the biggest earner and have the largest pensions despite being the younger partner by 15 years.

I have two DB pensions with 50% spouse, the NHS 2015 with 1/3rd spouse and I have taken out an annuity with 100% spouse but no guarantee period. This hasn’t cost a lot due to the age difference and health conditions. In addition, I have £225k remaining in my DB which, although I’m draining quickly until I reach 67 works well with a partner who would be 85 if I died at 70 with £16k (todays money) plus their own pensions, and about £120k, less at 75 and so on.

Left on my own I would have £47k a year plus whatever is left in the DC pot plus the house so could probably manage care costs.

The stress test we fail is both requiring more than 2-3 years care but we decided not to handle that on the assumption that in 90% of scenarios I can manage my other half’s care.