THE NEW STATE PENSION

From the 6th of April 2016 the new State Pension came into effect. In order to make it as fair as possible, those who have been building up State Pension benefits before that date will have a

“Foundation Amount” calculated. This basically represents the value of the State Pension benefits

built up under the old rules. To that will be added the benefit built up from the 6th of April 2016 up to their normal State Retirement Age.

As would be expected, there are some winners and some losers in this change-over. The best thing to

do is to request a State Pension Forecast – www.gov.uk/state-pension-statement. Their telephone number is 0345 3000168. This will confirm what your State Retirement Age is and also whether you have any “holes” in your National Insurance payment record which you may be able to fill.

UTILISING THE VALUE IN YOUR HOUSE – EQUITY RELEASE!

For those aged 55 and over it is possible to access some of the value in your property. There are no income requirements and the older you are, the more you can take out. The funds taken can be used for any purpose. There are three general approaches to Equity Release:

1) making interest-only payments indefinitely (Interest Only);

2) borrowing without having to make any repayments at all until the property is sold (Lifetime Mortgage);

3) trading ownership of the property for a lump sum and the right to life-long tenancy of the property (Home Reversion Plan).

LIFE ASSURANCE AND PUTTING THINGS IN ORDER

Unfortunately we do not live forever. To avoid leaving behind a confusion that family or friends have to sort out, there are some basic actions that should be taken:

1. Write to any company that you have a pension with and notify them of who you want the money to go to on your death. This is in addition to having a will. By letting the pension company have written notification, that money can be made available to the beneficiary(s) immediately. It does not have to wait for Grant of Probate, i.e. when your whole estate is valued up and your will reviewed. Such a notification would keep the pension funds from being included in your estate and possibly being subject to Inheritance Tax when you die.

2. Make sure you have an up-to-date will. These are not expensive.

3. In the event of illness or something else happening that affects your mental capacity – either for a short time or a long time – it is a good idea to look into doing a Lasting Power of Attorney. This is a written document that appoints someone to make decisions about your affairs in case you are not capable of doing so. There are two parts to this – one to deal with health issues and the other to deal with property and finance. In setting up a Lasting Power of Attorney you can do one or both parts. This is not inexpensive, but what it might save you in the long run might well be far more than the cost of getting one of these done.


4. Review your life assurance needs. If you have people who depend on you financially – whether a spouse, or children or business associates – having adequate life assurance is a good idea. Basic life assurance is generally inexpensive. We can provide quotes very quickly. Just give us a ring.

SAVINGS AND INVESTMENT TIPS

1. Don’t forget about National Savings products. Premium Bonds and their Direct Saver and Direct ISA accounts are competitive and also not subject to the usual £75,000 maximum protection (per banking group).

2. Investment bonds allow for taking withdrawals each year of 5% of the original investment, and these are not treated as income and do not have to be declared in tax returns.

Note: this is possible for up to 20 years and then the overall return from the investment bond is subject to possible capital gains tax.

HELP WITH FINDING LOST PENSIONS

Commonly people have accumulated various pension entitlements over the years and many have lost track of them. The Government provides a Pension Tracing Service which will help you locate any of your past pension benefits. For details of how to use this Tracing Service (which is free), google Pension Tracing Service or ring them on 0800 1223104.

PENSION FREEDOM – UNLIMITED ACCESS TO YOUR PENSION FUND!

If you are aged 55 or older, you can access all your private pension benefits at any time. This opens the door for many to access lump sums that were not available before. Ever since the new Pension Freedoms came into force last year, many people have chosen to draw significant amounts from their private pensions or even take it all. However, some have not taken into account the tax ramifications and paid unnecessarily high levels of tax. Others have failed to look ahead to see what the effects of taking their pension benefits now would be when they are older.

Our priority is to help our clients achieve their objectives and enjoy financial security. Sometimes it is not possible to achieve both of these aims, but we can help work out what can be done so you can make an informed choice. Do contact us if you want to look over your plans. For those in a position to maximise pension contributions do remember it is possible to carry forward unused pension allowances for up to three years.

MORTGAGE PROBLEMS?

There are a number of property owners who find themselves unable to obtain a new mortgage – whether to move property or even to just obtain a better mortgage interest rate. Changes in the recent past have tightened lending criteria on income requirements and age restrictions. This has meant that in many cases borrowers have been left stuck with their lender’s standard variable rate when new fixed rates are 1% to 2% better. Just a 1% reduction on a £150,000 mortgage would save £1500 in interest each year (assuming a 20 year repayment mortgage).

Here are a few examples of this ‘mortgage prisoner’ problem along with possible solutions:

Problem

Some older people cannot get a new mortgage with a longer term, or extend the

term of their existing mortgage, because of the current attitude of most lenders to

maximum mortgage ages.

Solution

Try your present lender to see if they can help, or contact us. There are more

and more niche lenders who will take a more enlightened view about maximum

mortgage ages – where the deal makes sense otherwise.

Problem

Some people were able to take a mortgage out in the past where it was possible

to self-certify the level of their income. In virtually all cases now income must be

proven and the self-employed will be assessed on the net income as shown by

the Tax Office.

Solution

Some lenders are more generous in their income calculations than others and some

lenders require only one year’s completed accounts for the self-employed. For those

over 55 with relatively small mortgage needs, Lifetime Mortgages (Equity Release)

can often get over the problem of age or affordability. We can research what is

possible for you.

Problem

Some people took out interest-only mortgages. Usually they had a plan of how

to repay them, but sometimes that original plan is no longer possible.

Solution

For some simply down-sizing will be a solution. For others who want to stay where

they are, however, there may be other options. There are still some interest-only

mortgage options available if one is looking to extend the time he can continue to

stay in the property. It is also possible for those aged 55 and older to use a Lifetime

Mortgage solution. Contact us and we can work out what options are available for you.