Sibbalds Financial Services (our sister company to Sibbalds Chartered Accountants) are back, answering the questions which you have sent us this week. Today’s Q+A focuses on equity release, State Pensions and tips on how to enjoy your retirement.
My mum is considering equity release as her house requires a considerable amount of maintenance. She would like new double glazing and her dream would be to have a conservatory for the grandchildren to play in. I have general concerns with regards to equity release and would like re-assurance on these products please?
A. Equity release has allowed a number of our clients to stay in their existing home, rather having the upheaval, stress and costs of downsizing.
If you are 55 or over and your finances are tighter than you would like them to be, releasing the cash tied up in your home could help your mum enjoy a more comfortable and enjoyable retirement. This is an ever growing market and many people have already taken this route in order to achieve this.
One of the first things you will want to know is how much you can release, which depends on your age, property value and type, and the product that suits your needs.
For a completely independent view on equity release, speak to one of our specialist advisers. Rest assured, we will provide you with all the information you need, and recommend whether releasing equity from your home is right for you.
I have recently started drawing my State Pension but I am also still working part-time. My tax code has now been changed to 400P, what does this mean?
A. Coding notices are provided automatically by HMRC’s computer and received by your employer or pension providers’ computer. HMRC use the information they hold on you and your income to provided codes, which are sent to your employers and/or pension providers. They then use them to calculate what tax to take from your income.
Tax costs can become quite complicated if you have more than 1 job or several pensions etc, and are deducted as per individuals’ personal income. If you are unsure we recommend you seek professional advice both on the run-up and after retirement.
Do you have any tips on how I could plan my retirement in order to enjoy it to the fullest?
A. These are our top 5 tips to enjoy a richer retirement:
Give yourself enough time: Do not leave it until last minute to arrange pensions and annuities. It can take months to get detailed quotes and decide the best strategy. Start researching the market and get valuations on your pensions 2 to 3 months before your retirement.
Think about your health: Insurers now offer enhanced annuities that tailor the income to your life expectancy. These can produce an income that is up to 50 % higher for those with serious long-term conditions. Sometimes it may even pay to switch out of a company pension to buy these enhanced rates.
Can you use ‘Top-Up Pensions’ for your lump sum? If you have made additional voluntary contribution (AVCs) into a company pension, this money might be a better source for your tax-free cash. In many cases AVCs will sit alongside the pension in a separate pot. With the help of Independent Advisers like ourselves, we will able to negotiate with pension trustees and use the money in an AVC fund to provide the maximum tax-free cash from and leave as much of your guaranteed annual income intact as possible.
Think about your spouse or partner: Will another person depend on your pension after you die? If so you will need to look at what provision, if any, is built into workplace pensions and investigate the costs of buying an annuity that pays a partner’s pension after you are gone.
Build State Pensions into the plan: You can get a forecast of how much your state pension will be by calling 0845 3000 168 or online at www.gov.uk. It may make sense, for example, to buy a level annuity (which pays the highest income at the start but does not rise over time) if you can draw on a decent state pension in a few years to boost your income again then.
As always, here at Sibbalds Financial Services we are here to guide and advise you through this critical stage of your financial planning. If you would like to discuss any of today’s topics please do not hesitate to get in touch.
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Image Sourced from Veronique Debord.