For many retirees – as well as those considering their retirement plans – their home is likely to be their largest asset. In an environment of high inflation and low savings rates, money can be tight for pensioners, but misconceptions about equity release plans might prevent retirees from releasing the value tied up in their home. Research by Safe Home Income Plans (SHIP), the trade body for equity release providers, has found a number of myths that persist about equity release plans.
1 – 69% of UK consumers believe you risk losing your home. However, you can remain in your property for life as long as it remains your main residence. In cases in which a couple is involved, this rule will apply to the last surviving member of the couple.
2 – 67% of UK consumers believe you will not be able to leave an inheritance. In fact, when you die, your home will be sold and the money used to pay off the loan. Although an equity release plan will reduce the value of your estate, any money left over will go to your beneficiaries. Taking out an equity release plan could also help by reducing inheritance tax liability.
3 – 52% of UK consumers believe you will not be able to move house. In practice, you have the right to move your equity release plan to another suitable property without suffering any financial penalty.
4 – 47% of UK consumers believe equity release plans are unsafe and unregulated. However, all members of SHIP have to abide by a rigorous complaints procedure to satisfy the Financial Services Authority.
5 – 43% of UK consumers believe your children will have to repay the loan themselves. In fact, you will never owe more than the value of your home and no debt is ever left to the estate. Importantly, SHIP providers also offer a no-negative-equity guarantee.
It is important not to confuse equity release plans with sale-and-rent-back arrangements, in which the house is sold – often at a discount – to a third party and then rented back to the vendor for a specified period. These arrangements tend to be an action of last resort, involving those in serious financial difficulties.
Equity release refers to Home reversion plans and Lifetime mortgages. To understand the features and risks ask for a personalised illustration.
Tuesday, 16 August 2011
Wednesday, 3 August 2011
Living to 100 – Centenarians on the increase
It has long been accepted that improvements in medicine, lifestyle and an understanding of the effects which habits such as smoking can have on our health means life expectancy is increasing. Future generations are likely to enjoy much longer and healthier lives on average than their predecessors.
However, figures released in April 2011 by the Department of Work & Pensions (DWP) illustrate more accurately exactly what that means. These figures suggest, of the under 16s already alive today, over a quarter are going to reach the age of 100 – and already, the average new-born female is going to live to over 90.
As Steve Webb, Minister for Pensions, commented at the time, this means that millions of people will spend over a third of their life in retirement. However, as the DWP were quick to point out, this news also coincides with a period during which pension savings are in serious decline.
An ageing population is putting our welfare system under significant pressure as more people need not only pension income but also healthcare, incapacity support and help within the home. You can therefore have little expectation that a State Pension will provide anything other than a safety cushion when the time comes. If your retirement plans include holidays, visiting relatives and treating yourself on occasion, then its time to take control of your savings and start building up a retirement fund of your own.
However, figures released in April 2011 by the Department of Work & Pensions (DWP) illustrate more accurately exactly what that means. These figures suggest, of the under 16s already alive today, over a quarter are going to reach the age of 100 – and already, the average new-born female is going to live to over 90.
As Steve Webb, Minister for Pensions, commented at the time, this means that millions of people will spend over a third of their life in retirement. However, as the DWP were quick to point out, this news also coincides with a period during which pension savings are in serious decline.
An ageing population is putting our welfare system under significant pressure as more people need not only pension income but also healthcare, incapacity support and help within the home. You can therefore have little expectation that a State Pension will provide anything other than a safety cushion when the time comes. If your retirement plans include holidays, visiting relatives and treating yourself on occasion, then its time to take control of your savings and start building up a retirement fund of your own.
Tuesday, 26 July 2011
Equity release myths
For many retirees – as well as those considering their retirement plans – their home is likely to be their largest asset. In an environment of high inflation and low savings rates, money can be tight for pensioners, but misconceptions about equity release plans might prevent retirees from unlocking the value tied up in their home. Research by Safe Home Income Plans (SHIP), the trade body for equity release providers, has found a number of myths that persist about equity release plans.
1 – 69% of UK consumers believe you risk losing your home. However, you can remain in your property for life as long as it remains your main residence. In cases in which a couple is involved, this rule will apply to the last surviving member of the couple.
2 – 67% of UK consumers believe you will not be able to leave an inheritance. In fact, when you die, your home will be sold and the money used to pay off the loan. Although an equity release plan will reduce the value of your estate, any money left over will go to your beneficiaries. Taking out an equity release plan could also help by reducing inheritance tax liability.
3 – 52% of UK consumers believe you will not be able to move house. In practice, you have the right to move your equity release plan to another suitable property without suffering any financial penalty.
4 – 47% of UK consumers believe equity release plans are unsafe and unregulated. However, all members of SHIP have to abide by a rigorous complaints procedure to satisfy the Financial Services Authority.
5 – 43% of UK consumers believe your children will have to repay the loan themselves. In fact, you will never owe more than the value of your home and no debt is ever left to the estate. Importantly, SHIP providers also offer a no-negative-equity guarantee.
It is important not to confuse equity release plans with sale-and-rent-back arrangements, in which the house is sold – often at a discount – to a third party and then rented back to the vendor for a specified period. These arrangements tend to be an action of last resort, involving those in serious financial difficulties. In contrast, an equity release plan does not involve the sale of the house and the individual has the right to remain in their home until they die or go into care.
1 – 69% of UK consumers believe you risk losing your home. However, you can remain in your property for life as long as it remains your main residence. In cases in which a couple is involved, this rule will apply to the last surviving member of the couple.
2 – 67% of UK consumers believe you will not be able to leave an inheritance. In fact, when you die, your home will be sold and the money used to pay off the loan. Although an equity release plan will reduce the value of your estate, any money left over will go to your beneficiaries. Taking out an equity release plan could also help by reducing inheritance tax liability.
3 – 52% of UK consumers believe you will not be able to move house. In practice, you have the right to move your equity release plan to another suitable property without suffering any financial penalty.
4 – 47% of UK consumers believe equity release plans are unsafe and unregulated. However, all members of SHIP have to abide by a rigorous complaints procedure to satisfy the Financial Services Authority.
5 – 43% of UK consumers believe your children will have to repay the loan themselves. In fact, you will never owe more than the value of your home and no debt is ever left to the estate. Importantly, SHIP providers also offer a no-negative-equity guarantee.
It is important not to confuse equity release plans with sale-and-rent-back arrangements, in which the house is sold – often at a discount – to a third party and then rented back to the vendor for a specified period. These arrangements tend to be an action of last resort, involving those in serious financial difficulties. In contrast, an equity release plan does not involve the sale of the house and the individual has the right to remain in their home until they die or go into care.
Monday, 18 July 2011
LIFE ASSURANCE – SPECIAL OFFER!
According to survey, 61% of families in the UK do not have a life assurance policy in place, and 93% of families do not feel they have adequate financial protection. Simple life assurance generally can be very inexpensive. To help encourage those who should have life assurance (or more life assurance) we are running a special offer for August. All new life assurance policies that are taken out in August and go into force by September will receive at least £25.00 in Marks and Spencer gift vouchers when the policy starts. Depending on the response we get, we may also refund the first monthly payment to help make it just that little bit easier to put in place.
Monday, 11 July 2011
SOME IMPORTANT DATA ON PENSIONS
If you are employed or a company director, the maximum your company can put into your pension in the current year is £50,000, although you may be able to take advantage of earlier years if you had made a contribution smaller than that in those years. If you are making contributions on your own, the maximum you can contribute is up to 100% of your earnings for that year – subject to the £50,000 maximum. Note: The maximum total you are allowed to have in pensions is £1,500,000 – admittedly not something that most of us have to worry about!
Contracting out of SERPS (now the State Second Pension Scheme) will stop on 6 April 2012 for everyone. You then automatically go back into the State Second Pension Scheme. You do not have an option.
Compulsory pensions! From October next year all employees will be required to join a pension scheme provided by their employer and both employee and employer will be required to make contributions.
Contracting out of SERPS (now the State Second Pension Scheme) will stop on 6 April 2012 for everyone. You then automatically go back into the State Second Pension Scheme. You do not have an option.
Compulsory pensions! From October next year all employees will be required to join a pension scheme provided by their employer and both employee and employer will be required to make contributions.
Monday, 4 July 2011
MORE ON ANNUITIES
When you are dealing with pensions, it is important that you understand the concept of an annuity. An annuity refers to the income you are paid from your pension – as opposed to the Tax Free Cash. You buy an annuity like any other commodity. There is an open market where you can seek out the best deal. The older you are, the more you will get for your money. This is simple to understand. If you are aged 55 and want an annuity, the pension providers will look at the statistics and see that you are probably going to live another 30 years or more. If you come to the provider with the same amount of money and you are 65, you will get a higher income because they can see statistically they are only likely to have to pay it out for 20 years. So £50,000 would buy a man aged 55 an income of £2960 per annum, and a man age 65 £3400 per annum. Once you purchase the annuity, you cannot change it in the future. If this does not suit your circumstances, investigate the other pension options available.
There are a few bells and whistles to know about when considering annuities. First, you can opt to have an income that would still be paid to your wife if you go before she does. Secondly, you can opt to have an income that starts lower but increases each year to counter the effects of inflation. And thirdly, if you are in poor health or have a difficult medical history, you should look at Enhanced Annuities. Basically these give people with medical problems more for their money – on the basis that they are not going to live as long as someone who is of the same age but in good health.
There are a few bells and whistles to know about when considering annuities. First, you can opt to have an income that would still be paid to your wife if you go before she does. Secondly, you can opt to have an income that starts lower but increases each year to counter the effects of inflation. And thirdly, if you are in poor health or have a difficult medical history, you should look at Enhanced Annuities. Basically these give people with medical problems more for their money – on the basis that they are not going to live as long as someone who is of the same age but in good health.
Thursday, 23 June 2011
Junior ISAs - New kid on the block
The Coalition Government has now confirmed details of the long awaited savings plan analysts had been expecting since the withdrawal of Child Trust Funds (CTF) last year. The Junior ISA will be launched in November and will extend to under 18s the same tax benefits which parents (and all adults) already enjoy. Their exact structure is subject to final legislation that may change, but this is the plan so far.
The Junior ISA will allow parents to open up a specific account in their child’s name, into which they, their family and friends can contribute a total of up to £3,000 a year. These contributions will then be invested in a chosen mixture of cash and/or stocks and shares and the benefits locked up until that child reaches 18. Anyone under 18 born before September 2002 or after January 2011 (i.e.: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).
The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values are subject to growth rates but just to give you an idea, assuming an average of 5% pa (net of charges), that £3,000 pa could leave the lucky beneficiaries with a contribution of over £80,000 towards their world trip, first house or those hotly debated university tuition fees.
The Junior ISA will allow parents to open up a specific account in their child’s name, into which they, their family and friends can contribute a total of up to £3,000 a year. These contributions will then be invested in a chosen mixture of cash and/or stocks and shares and the benefits locked up until that child reaches 18. Anyone under 18 born before September 2002 or after January 2011 (i.e.: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).
The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values are subject to growth rates but just to give you an idea, assuming an average of 5% pa (net of charges), that £3,000 pa could leave the lucky beneficiaries with a contribution of over £80,000 towards their world trip, first house or those hotly debated university tuition fees.
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