Financially assisting a parent to retire
Comments
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She could consider making a contribution of £2,880 (even if she doesn't earn that much) to a stakeholder pension (provider will then reclaim tax on her behalf, bringing the total up to £3,600) and then cash in the lot. She could do this 3 times in separate tax years. 25% of each 'pot' would be tax free, the rest taxed at her marginal rate.0
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What do you class as 'small amount of savings'?
How much state pension does she get?
Just thinking about eligibility for Pension Credit...
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.My Excel Mortgage Calculator Spreadsheet: http://forums.moneysavingexpert.com/showthread.html?t=11571730 -
Standard interest only mortgages are available into the 80s at the moment. If that reached the end of term, equity release would be easy at that age.
If she's comfortable investing that money could be invested to generate an income. If her life expectancy is normal some of the capital could be used to fund deferring her state pension.0 -
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Around £1,000 to £2,000 income can be generated on that via peer to peer lending.
One thing I did with my own mother was guarantee no loss of capital. No immediate cost for you and it may help her to be comfortable.
That could be an an avenue worth looking into actually as £100-£150 month would probably make the difference. Is Zopa still the go-to p2p lender or are there other better options these days?My Excel Mortgage Calculator Spreadsheet: http://forums.moneysavingexpert.com/showthread.html?t=11571730 -
You could just tell a porkie by saying you won on the premium bonds or lottery etc - she may not feel bad about accepting a wad of cash from you then, as she might not feel she is taking any of your heard earned money. If she insists on paying you back at some point tell her she can do it from this inheritance (assuming she does get it) or from her estate once....well you know the rest!
Don't blame me though if she turns up in a new Mercedes a week later....:)0 -
Messy and with all sorts of fees and costs (not least punitive second home stamp duty). Tax implications both now and after she dies - and as another poster has pointed out, could be issues if she needs to go into care.
Yes forgot about the new stamp duty rules! This was just something we considered when OHs father passed away but that was a few years ago.
If you think you are too small to make a difference, try getting in bed with a mosquito!0 -
She could consider making a contribution of £2,880 (even if she doesn't earn that much) to a stakeholder pension (provider will then reclaim tax on her behalf, bringing the total up to £3,600) and then cash in the lot. She could do this 3 times in separate tax years. 25% of each 'pot' would be tax free, the rest taxed at her marginal rate.
Sounds an interesting idea, given her total income would still be under the ~£12k annual tax threshold will the remainder be untaxed as well?My Excel Mortgage Calculator Spreadsheet: http://forums.moneysavingexpert.com/showthread.html?t=11571730 -
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.That could be an an avenue worth looking into actually as £100-£150 month would probably make the difference. Is Zopa still the go-to p2p lender or are there other better options these days?
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.0 -
My mum's a divorcee in her late 60's, owns her house outright and has a small amount of savings.
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.
If you persuade her to do this then the chance arises for you to pair it with your lending her the money to bridge her resulting income gap. You could always say that she can pay you back out of her inheritance. Or out of a future equity release if you need the money back before the inheritance arrives. As someone else said you want to document all this properly. For family loans we've usually exchanged letters and, on one occasion, asked the neighbours over to witness the agreements. Dominant cost: a couple of glasses of sherry.
In your shoes I'd ensure that your siblings understand what you plan and approve of it.Free the dunston one next time too.0
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