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Income From Savings

edited 30 November -1 at 1:00AM in Over 50s Money Saving
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honeytree_2honeytree_2 Forumite
5 posts
edited 30 November -1 at 1:00AM in Over 50s Money Saving
I am writing on behalf of my mother who is 70 years old.
When my father died she was given a small pension which these days is next to nothing. £ 16.00 per month.
She gets her normal state pension.
At the moment she has £2000 tied up in 'granny' type bonds which give her a quarterly return.
There is now £4000 in a Lloyds Bank investment trust which pays a quarterly income. This started at around £8000 but she has had to draw money from time to time to pay for large bills. This has meant that the quarterly income is reducing and making it tough to make ends meet.
She has no other savings.
Should she be looking into moving money into ISAs etc. or do you have any other suggestions.
She does own her house which is worth around £200,000. Is there any way this could be used :-/
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Replies

  • lisyloolisyloo Forumite
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    Firstly has she applied for the new benefits that applied from 1st October (pension credit and savings credit).

    She will not be penalised for her home or any savings up to £6K.
    Even with savings of over £6K the income is taken into account but it doesn't necessarily mean she won't qualify.
    I believe Martin has written an article on this with some good links(Moderater has added:Pensions Credit: A Brief Guide), another good place to look is the Age Concern website - they have loads of factsheets and information.

    If she needs to release money from the house then the best way to do it would be to downsize i.e. move to a smaller property or a cheaper area.
    The costs are fairly small and the money freed up will be entirely hers to do with as she wishes.
    She will also have a smaller property to clean and maintain and lower bills.

    If this is out of the question then some kind of equity release scheme may be appropriate.
    The kind of scheme I am thinking of is one where she gets an income in return for a proportion of her property when she no longer needs it (death or nursing home).
    The following is purely my unqualified opinion - but I believe that she will be disapointed with the return she gets from this for 2 reasons.
    Firstly - she is relatively young - she could live to 95 or older so the companies concerned have to allow for that.
    Also the comapny involved will of course be taking a profit.
    Age concern is a great site for info again.
    If you are interested in this then it would be a good idea to go for a scheme that is a member of SHIP (Safe Homes Income Plans) - this basically means that the debt never exceeds the value of the property so there are no nasty debt collectors hassleing the beneficiaries for money after her death.

    Having been through it will my husbands parents, I can say that financially moving to somewhere cheaper is the much better bet.

    Start with the benefits check first though.
    They improved in October and she may be entitled to some help.

    Hope that helps
  • Lisyloo

    Thanks for this infomation.
    She has applied for the pension and savings credit and recieves £4.00 per week. This has been a help.
    Should she move any of her savings to ISAs or would it be better to leave them where they are.
    Cheers
  • lisyloolisyloo Forumite
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    One of the main benefits of ISA for most of us is not having to pay any tax on the interest/gains we receive.
    I suspect from what you have said that your mother is not a tax payer and so there is no great advantage for her.

    Would she be amenable to moving?

    My parents in law recently did it from a £135K property and released about £35K.

    It seems a shame for her to be struggling when she has so much money tied up in the house.
  • I have tried to convince her of the advantages but she wants to stay where she is.
    Thanks for your advise though.
  • SystemSystem Forumite
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    Hi

    'Downsizing' - moving to a smaller house - is not always the obvious solution that it seems. We had a mortgage which would have continued until we were in our early 80s - we wanted to be rid of it, and to free up the £265 a month we were paying on it. Numerous people suggested moving somewhere cheaper, but we didn't really want to move to an ex-mining village in the north-east, especially as my husband is a Londoner, and we're happy living in south-east Essex! In addition, what is smaller than a 2-bed bungalow? We've spent quite a lot of time, money and effort in 'streamlining' this little place to make it much more manageable and convenient as we get older. But still, there was the mortgage....So what we did was to go down the equity release route. We released 25% of the property value and the mortgage got paid off. The interest on £35K at 6.80% rolls-up during our lifetime, to be repaid from sale on death of second survivor.

    If anyone is interested in exploring this route further (needless to say I have no axe to grind and no one will try to pressurise you) I can recommend the IFA who arranged the whole thing for us. We're very satisfied with it.

    One plus on our part - none of our offspring expects a legacy from us when we depart this mortal coil! Whatever is left over, under our Wills, is to be split between 5 grandkids, 3 of mine and 2 of his (my second marriage, his 3rd).

    HTH

    M
  • Robert_Sterling_3Robert_Sterling_3 Forumite
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    If your mother lives alone she might consider let a room to somebody. You do not have to pay tax on the fisrt £4000 or so that you get as rent. Another advantage is that there is somebody else in the house. We all know that there may be some disadvantages too.
    ...............................I have put my clock back....... Kcolc ym
  • Norman-BNorman-B Forumite
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    My father, 80 years of age, has his savings in an account with Abbey. Now, I have discouvered he is only getting
    0.5% interest on his savings and I have suggested that he move his money into an account paying nearer 5% to enhance his income.
    He is most reluctant as he is fearful that by doing so he will incur an income tax penalty. Am I correct in thinking that it will make no difference to his income tax situation. He is in receipt of his state retirement pension and a private pension. He is recently widowed.
  • robnyerobnye Forumite
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    every one has a tax allowance, regardless of whether they are working or in your father's case a pensioner.

    standard tax allowance is = £4745
    age related 74+ = £6950

    so add up your fathers pension, and take it away from £6950

    the difference will be how much he can earn in interest before he has to pay tax on it
    smile --- it makes people wonder what you are up to.... ;) :cool:
  • margaretclaremargaretclare Forumite
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    My father, 80 years of age, has his savings in an account with Abbey. Now, I have discouvered he is only getting
    0.5% interest on his savings and I have suggested that he move his money into an account paying nearer 5% and a private pension. He is recently widowed.

    Yes, Norman, your Dad could have a much better account even with Abbey! Or there are many, many others. No one should stick with 0.5% derisory interest when there are others offering more than 5%.

    Your Dad could complete the Inland Revenue form to get his interest paid without tax.

    Best wishes

    Margaret
    [FONT=Times New Roman, serif]Æ[/FONT]r ic wisdom funde, [FONT=Times New Roman, serif]æ[/FONT]r wear[FONT=Times New Roman, serif]ð[/FONT] ic eald.
    Before I found wisdom, I became old.
  • Norman-BNorman-B Forumite
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    Thank you for the replies.
    My dad pays a small amount of income tax due to having a state pension AND a private pension. Was I incorrect in thinking, that as the building Society deducted the tax at source, that it would not mean that he would have to pay Tax again on the interest?
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