Retirement Planning
Retirement can
be a life-
changing
experience
At long last you’ll have time to enjoy the money you’ve worked hard for. And with extra time on your hands you’ll need the money to do all the things you want to.
Make sense of retirement planning
There are several things you might want to think about in retirement. Not just how to make your money work harder, but whether you could plan ahead to help minimise any potential Inheritance Tax liability. And what about the possible costs of long-term care? These are just some of the main issues.
Annuities
When you retire, the pension fund you’ve built up may be used to buy an annuity. An annuity is a contract you purchase with a lump sum which then provides a regular income for the rest of your life.
Once you have bought the annuity and payments begin, you can't normally cash it in or alter it. The amount of annuity you can buy with your pension fund will depend on the type of annuity, whether you're male or female, how old you are when you buy it and interest rates at that time.
There's a range of options available. With the recent changes to Government rules on pensions, there's now even more choice and flexibility. Have a chat to one of our Financial Consultants to make sure you get a suitable deal.
Equity release
You’ll probably want to keep the standard of living you’re used to when you retire. It might be worth considering an equity release plan. Quite simply, an equity release plan is a way of releasing cash from your home without having to move.
Most people's biggest asset is their home - and with the house price increases of recent years, you could find yours is worth more than you'd thought.
There are two main types of equity release:
Lifetime mortgages
A lifetime mortgage is a loan secured on your home, which is usually repaid when you die or go into long term care. You receive a cash lump sum and you can continue to live in your home as long as you wish. There are no monthly repayments to make and the interest charged over the term is calculated on the total amount borrowed and the interest already added, which quickly increases the amount you owe. This will reduce the value you have in your property, possibly to nothing. Your tax and welfare benefits may also be affected and therefore the amount of inheritance you leave.
The amount you borrow will depend upon your age and the value of the property. Minimum property values apply.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Home Reversion Plans
These offer a cash lump sum for selling all or part of your property to a 'reversion company' (Grainger PLC). Because the money is provided upfront (and you continue to benefit from living in your home) you will get less than full market valuation of the property.
Using this type of arrangement you can choose to reduce the proportion of the value you hold in your property, possibly to nothing, and therefore the amount of any inheritance you leave. Your tax and welfare benefits may also be affected.
The amount you borrow will depend upon your age and the value of the property. Minimum property values apply.
This is a home reversion plan. To understand the features and risks, ask for a personalised illustration.
Whole of life plans
Unlike some life insurance plans, a whole of life plan provides cover for the whole of your life and not just a set term. That means it’s guaranteed to pay out, whenever you should die. Whole of life plans are often used for Inheritance Tax planning. The idea is, you take out a plan to cover the amount of your expected Inheritance Tax bill and use a suitable trust. It can appeal to people who don’t want to leave loved ones facing a large tax bill.
Pension Credit
The Government introduced Pension Credit in October 2003, which currently provides a means tested benefit for people over 60. Pension Credit is worked out based on the level of income and savings that you have. This could mean extra money for you every week.
Investing for Income
it’s worth knowing that there are investments available that can provide an income to top up what you’ve already got coming in to supplement your retirement income.
Inheritance tax planning
Nowadays, Inheritance Tax is no longer a tax for the rich. The fact is, it’s affecting more and more people. That’s because of the huge rises in property prices we’ve seen over the last few years.
It affects taxable estates worth more than £312,000 (In the 2008/9 tax year). For taxable estates over that level, Inheritance Tax will be charged at a staggering 40% on the excess - 40p in every £1!
Your taxable estate does not just mean your property. It can mean all of your assets, including certain types of gifts you might have made in the 7 years before you die, your car, savings and investments, house contents and other personal possessions less any outstanding mortgages, loans or other debts.
Thankfully, there are solutions you can consider, so your loved ones often need not be left facing a hefty tax bill. Remember, of course, that tax laws can change.
Expert, qualified guidance, in-branch
You’ll be pleased to know that help is at hand at the Cheshire. In-branch, you’ll find a financial adviser, fully trained and on hand to give you information and advice on a range of financial products.
Your adviser will provide an expert advice service, at a convenient time for you. Once you’ve made an appointment, we’ll let you know what you need to bring with you.
Cheshire Building Society is authorised and regulated by the Financial Services Authority (registration number 206102).
