“FREEDOM” NOT TO HAVE ONE!

The first “Freedom” one has is not to have any pension at all! If you are self-employed, you do not have to contribute to a pension (other than the State Pension) and even if you are employed, you can opt out of the company’s Workplace Pension. Clearly, however, there is not much value in a "Freedom” which means you have very little to live on in retirement.

A number of people plan to use other sources of income in their later years such as renting out property or down-sizing to recover value from their own property. We would advise all our clients to use pensions to provide at least part of the income they will need in retirement. If you are unsure of why this is a good idea, do take advice.

PENSION FREEDOM?

It is now 3 years since the Government launched changes to pension regulations which they called “Pension Freedom”.

Essentially they made changes which gave more choices as to how you can use your pension savings when you reach pensionable age. It is worth knowing your options if you are 55 or older or approaching age 55. We can use our experience and expertise to help if you have questions.

The choices we examine here primarily relate to personal pensions, also called “Money Purchase” and “Defined Contribution” pensions. If you have a Final Salary Pension (also known as a Defined Benefit Plan), you will need to seek advice from your pension provider as the rules are often different from scheme to scheme.

DON’T FORGET THE “RENT-A-ROOM” SCHEME

Do remember that, if income is tight, you can make tax-free income by letting out a room or rooms in the property you live in. Up to £7,500 can be earned this way with no tax liability.

CHEAP LIFE ASSURANCE

The most inexpensive type of life assurance is called term assurance. It is life assurance for an agreed amount of cover over an agreed term of years at a fixed price. For example life assurance of £100,000 over 25 years for a 30 year old would only cost about £6.00 per month and for a 40 year old only about £9.00 per month.

If you would like an estimate of the cost of life assurance for you, just call or email us. Let us know your date of birth, whether you are a smoker or non-smoker and how much life assurance you would like to have, and we can reply with an illustration from the open market within an hour or two. We do not charge for this service and, if you want us to arrange the life assurance for you, there is usually no charge by us to you as the life companies pay commission.

FIND OUT NOW HOW MUCH YOU COULD BORROW!

In case you would like to find out immediately how much you could borrow using a Lifetime Mortgage, just email us on info@sovereignfinance.org and let us have the following data:

1. Your date of birth (both dates of birth if two are involved)

2. The estimated value of the property

3. Anything unusual about the property

We will reply by email within two hours. There is no charge for this service. (Note: We have over 30 years of experience and know-how in dealing with all types of mortgages.)

SOME LIFETIME MORTGAGE EXAMPLES

One couple faced repossession of their property as they had had an interest-only mortgage and their plan for repaying it had not worked out.

They also had other debts secured on the property. They did not have adequate income to afford a standard residential remortgage and the wife was quite a bit younger than the husband which meant that they could not get a big enough lifetime mortgage to pay off all the debts with charges on the property. We were able to source a Lifetime Mortgage provider who would work on the age of the husband only and all was sorted out just in time. Another man was single and owned his property outright. His income was pretty much enough to pay the expenses as they came due, but he had no children or close family and wanted to have access to funds to be able to enjoy life a bit more. It was possible to arrange a facility with a small initial borrowing and a considerable reserve which he could call on when needed. A recent survey was done to find out for what reasons people take out Lifetime Mortgages. The major reasons were as follows: 63% used it to pay for home improvements or renovations; 57% did it to meet a shortfall in income; and 55% did it to help their family in one way or another.

LIFETIME MORTGAGES

For those over 55, Lifetime Mortgages offer what is probably the greatest level of flexibility, including:

• Option to make no payments at all

• Option to make payments of interest regularly, or when you choose to do so

• Almost any past adverse credit can be considered

• There is no fixed term for the mortgage. It can last for life (or until the owner goes into care).

• There is a guarantee of no Negative Equity. So even if you choose to make no payments, the amount that has to be repaid at the end can never exceed the sale price of the property on the open market, regardless of how many years you have had the mortgage.

• You can take the maximum amount from the mortgage at the start, or take some to start with and have a reserve facility for drawing more when needed.

• You can use a Lifetime Mortgage to re-mortgage an existing property or to buy a new one.

• No income requirements or affordability calculations at all – the borrowing is based solely on the property value and the age of the borrower (note: where there are two borrowers on the mortgage, the lenders will use the age of the younger).

Here are examples of what the maximum borrowing could be currently (assuming a property value of £300,000):

Age 55       25% of value £76,000

Age 60       32% of value £97,000

Age 65       37% of value £112,000

Age 70       42% of value £127,000

Age 75       48% of value £144,000

Age 80       52% of value £156,000

(Note: there cannot be another mortgage on the property along with a Lifetime Mortgage so any existing mortgage must be paid off.)

Note: There are also options to have a Lifetime Mortgage on a rental property and on properties of unusual construction. However, the percentage of borrowing for a Lifetime Mortgage on a rental property is much less than that shown above.