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Inheritance 'makes some purchases possible'

Fri, 30 May 2008 15:24:17 GMT

Paying off the mortgage is an option only possible in the event of a big inheritance, according to new research.

Engage Mutual Insurance has reported that 23 per cent of people believe that fully paying off a mortgage is only possible with a lump sum.

Some 21 per cent of people would use a large inheritance to buy either a holiday home or a second home, while 19 per cent would take the lump sum and travel around the world.

A further 17 per cent would use the opportunity to buy a new car, while 12 per cent would retire if the legacy was hefty enough.

But Karl Elliot, speaking on behalf of Engage Mutual, said that it is "worrying" how many are relying on inheritance.

He said: "Whilst inheritance can be a great financial help it is not something we can control. We encourage people to take control of their families' futures and save little and often."

Earlier this month, Mr Elliot urged people with financial worries to seek help.

Britain's pensioners 'should pick up money owed promptly'

Wed, 12 Mar 2008 16:00:55 GMT

Older people in the UK need to act quickly in order to get the money they are owed in pension credit, it has been claimed.

According to statistics from Citizens Advice, four in ten pensioners are entitled to top-up credits in addition to the basic £87.50 per week.

The body added that the winter fuel payment is also being missed by some and if people are owed it they should check before March 31st.

Citizens Advice director of policy Teresa Perchard said that "red tape" is obstructing a number of people who are entitled to extra cash.

"Too many pensioners are missing out on money that is rightfully theirs. Many don't know about things like council tax benefit, or think they won't qualify for help. Others are put off claiming by red tape," said the official.

Currently men over the age of 65 and women over the age of 60 are allowed to claim basic pensions, although this will be equalised to 65 years of age by 2020.

Inheriting debt is 'a fear of the young'

Wed, 9 May 2007 14:56:06 GMT

The debt mountain left by a deceased parent is something most young Britons fear, it has been revealed.

A survey from AA Legal Services has found that 70 per cent are worried that they will end up with the arrears of their mums and dads.

Similarly, 86 per cent of respondents are concerned that they will receive nothing except debt when their parents pass on, with 31 per cent expecting sibling rivalry to be an issue when it comes to who gets what.

However, these people need not rely on this income if they start saving some money themselves, a spokesman for the company has claimed.

"As young families take on bigger and bigger debts to get a foot on the property ladder, few are banking on a future inheritance to help clear the mortgage," said James Malloy, head of AA Legal Services.

Meanwhile, money charity Credit Action has cited the UK's combined personal debt mountain to be £1.3 trillion.

Parents 'want financial help from offspring in old age'

Thu, 15 Mar 2007 18:37:15 GMT

Despite recent reports of parents having to provide financial support for their children long into adulthood, it has emerged that many retirees are relying upon their offspring for money.

A survey conducted by Yorkshire Bank shows that more than 25 per cent of all parents hope that their children will help bankroll their retirement and only 13 per cent have adequate savings.

This suggests that many older people could be facing financial difficulty in their later years unless their children are prepared to provide support. In light of these findings experts at Yorkshire Bank argue that parents need to make the necessary provisions for their retirement.

"By not saving for the future, parents appear to be aware they're storing up hardship for themselves," stated Gary Lumby, Yorkshire Bank head of retail.

"The easiest solution is to start saving now."

Scottish Widows recently reported that a growing number of parents are having to financially support their grown up children due to poor money management among younger generations, with almost 40 per cent of mums and dads spending their savings on their kids.

Pensioners susceptible to inflation

Thu, 24 Aug 2006 16:34:58 GMT

Inflation is considered to be the biggest risk when buying a level conventional annuity by 90 per cent of advisors, according to new research by Prudential.

Annuities that guarantee a level income for life will continue to be popular but they ignore the effect that inflation could have on their retirement income.

Over the past year, pensioner inflation was 3.9 per cent, the highest for a decade, considerably above the average rate of 2.4 per cent.

Retirements lasting 20 years are fast becoming the norm, so even if the Bank of England does achieve its inflation target of 2 per cent, £1,000 today will be worth just £620 in 20 years' time.

Aston Goodey, Head of Retirement Income at Prudential, said: "Retirees don't realise the impact that even modest changes in levels of inflation will have on the purchasing power of their income, and therefore it is important to seek independent advice before choosing an annuity.

"One in four 65-year old men will live into their 90s, so securing a lifetime income in retirement is vital. Annuities can provide the security of an income for life and it is therefore important the right choice of annuity is made to suit individual circumstances."

The alternative to inflation-linked conventional annuities is the less stable profits annuities, which link the level of income to the performance of the with-profits fund. This fund has a mix of assets that grow over the long term and give returns as bonuses, which may vary from year to year.

British women miss out on pension benefits

Mon, 14 Aug 2006 17:32:21 GMT

Six in ten women are not contributing to a pension fund, potentially losing out on pension tax relief, according to new research by HSBC.

While the research shows that the level of understanding about pensions is on the rise, an alarming number of women mistakenly believe that they have to be working to pay into a pension.

Stakeholder pensions are available to anyone irrespective of their working status.

Ian Martin, head of pensions and retirement income at HSBC Life said: "Stakeholder pensions are a great solution for women who have opted to take a career break while raising their children.

"However, very few mums are taking advantage of the fact that they, their spouse or someone else can continue to pay into a stakeholder pension in their name even if they are not working."

He continued: "With the Inland Revenue adding £28 to every £100 invested, women around the country are missing a trick by not taking advantage of the pension options available to them."

HSBC calculated that the average woman, making a £100 per month pension contribution, had her first child at 27 and took a career break of up to five years, could stand to achieve a retirement fund 28 per cent less than if she had carried on contributing.

The introduction of the stakeholder pension marked it fifth anniversary this year, but the research shows that people are still failing to use them to their full potential.

Inheritance assets tax plan scrapped

Tue, 13 Jun 2006 17:46:22 GMT

The chancellor has scrapped plans to tax assets left in trust in wills, the government has announced.

The Treasury said that spouses left money in trust will not have to pay inheritance tax on the death of a partner.

Lawyers had warned that millions of wills would have to be changed had the plan gone ahead. Only people who inherit between 18 and 25 years old will now be liable.

"Solicitors will welcome the fact that many millions of their clients will not now have to go through the expense and trouble of having their will reviewed," said Law Society president Kevin Martin.

"We are particularly pleased that spouse exemption will no longer be lost, something of concern to those in second marriages and those who wish to comply with Sharia law.

"The government is also taking a much more sensible line on will trusts vesting assets to children between the ages of 18 and 25."

UK puts pension's faith in celebrity relics

Wed, 7 Jun 2006 15:20:16 GMT

A growing number of people in the UK are considering funding their pensions with celebrity memorabilia, research for Aon Consulting has claimed.

The finding is part of a survey of alternative pensions investments, with 70 per cent of people prepared to consider unusual investments over traditional pension funds.

Celebrity relics were picked as a hot-tip investment by 29 per cent of respondents.

A more sensible 38 per cent said that they would consider art and antiques, while 34 per cent picked evergreen forest and a similar number would choose classic cars.

Almost a third are placing their faith in fine wines and whiskies, said Ian Dearnley of Aon Consulting.

"It's great that employees are thinking about alternative ways to fund their retirement as a diverse investment portfolio can help to minimise the risk of poor returns," he said.

"However, the average UK investor should be wary of directing too many funds towards the latest investment craze of buying signed photos of today's hottest celebrity, or relying on a dusty bottle of Bordeaux to appreciate in value, without initially seeking proper investment advice."

Two-fifths missing out on pensions credits

Thu, 11 May 2006 17:08:50 GMT

Almost two-fifths of all pensioners entitled to pension credit are not claiming it, government figures have revealed.

The pension credits, which were launched in 2003, are intended to lift the poorest pensioners out of poverty.

Originally expected to reach around 73 per cent of those eligible, actual figures have levelled out between 31 and 39 per cent.

"These figures show in the starkest possible terms that Gordon Brown's flagship policy on pensioner poverty is failing to help many of the most vulnerable older people," said Anna Pearson, spokesperson at Help the Aged.

"Take-up has slowed almost to a crawl with an incredible £2 billion a year left unclaimed, which is equivalent to a tax windfall to Treasury coffers of £5.5 million each and every day."

The government said that the scheme was nonetheless boosting the pensions of two million retired people, but charities and MPs have called for a new way to distribute the funds.

Inheritance tax to almost triple says Halifax

Tue, 21 Mar 2006 17:11:08 GMT

Inheritance tax levied on wills and estates could nearly triple to an annual £5.6 billion, Halifax has claimed.

This is a massive increase on the £1.6 billion taken by the taxman on wills in 1997/97, the last significant boost to the inheritance tax threshold.

Assets worth more than £275,000 are currently charged at the top inheritance tax rate of 40 per cent, although this is due to increase to £285,000 from April.

If the Treasury increases this in line with the retail price index measure of inflation - which tracks the rising costs of goods every year - then tax receipts will rise.

Property values have increased at a faster rate than inflation, meaning that more and more cash is earmarked for the chancellor every year.

"Inheritance tax revenues are likely to rise significantly over the next 15 years if the government doesn't index the threshold in line with house price inflation," said Tim Crawford, Halifax group economist.

"The ageing of the British population means the number of estates is likely to increase substantially in the future. More of these estates will fall into the inheritance tax net."

Employees uninformed about A-day says research

Thu, 9 Mar 2006 17:23:07 GMT

More than a fifth of all companies in the UK have yet to inform their staff about upcoming pensions plan changes.

Only a tenth say that they have completed their employee communications. Pensions savings are to be overhauled in less than a month, on "A-day", April 6th.

Over 20 per cent of companies with 50 or more employees (around 8,000 businesses) say that they haven't informed staff of what A-day could mean for them or their savings.

Around 3,000 of these added that they were happy for their employees to find out the details either elsewhere or not at all.

The changes, which have been heralded as the greatest pensions shake-up since the universal system was introduced in 1908, are intended to simplify pensions and increase savings.

"The lack of employee communications is one of the key reasons for the pension crisis," said David Harris of Prudential, which commissioned the research.

"It's always been a challenge for employers to interest staff in pensions.
"Failing to inform and educate their staff about the pension reforms will result in greater confusion and prevent more employees from participating in company pension schemes."

Millions planning equity relief to avoid will bills

Fri, 24 Feb 2006 17:37:59 GMT

Despite being persistently portrayed in the Daily Mail and the Telegraph as the generation that loves to 'Ski' - Spend the Kids Inheritance - two million retired people are finding other ways to avoid inheritance tax.

One in five say they plan to avoid heavy death duties from eating into their property and savings by drawing on equity release to help their children and grandchildren while they are still alive.

Inheritance tax looks set to hit the estates and legacies of 40 per cent of pensioners, and many plan to minimise the cost by spending it rather than leaving it in a will.

"It is understandable that retirees may want to see their children and grandchildren benefit from the money that would otherwise be put aside for their inheritance," said Murdo McHardy of Scottish Widow, which carried out the research.

"Receiving these gifts can help offspring to financially prepare for their future, for example by providing a deposit on a first home.

"Equity release products are a way for some retirees to be able to help their children, provided that it suits their individual circumstances," he added.

Number of pension age employees will increase by third, says ONS

Fri, 13 Jan 2006 16:52:23 GMT

The number of people unable to retire at 65 is set to soar over the next 15 years, as poor savings and low pensions make retirement an economic luxury, say figures from the Office of National Statistics (ONS).

By 2020, 775,000 employees over the age of 65 will still be clocking on, says ONS - a third more than the 582,000 who currently do so.

"For thousands of people, their pensions will not deliver the income that they thought they would," Financial Advisor Philippa Gee told the Daily Mail.

"For many others, they have been in debt all their lives and simply cannot afford to retire. Many people in their 30s and 40s think it is fine not to save any money for the future and plan to keep on working. But what happens when their health deteriorates?"

And experts say that even those who are saving are failing to put enough away for the future - the average company pension fund for someone who retires at 65 is worth £40,000, equivalent to an annual income of just £2,000.

"For those older people who do not want to carry on working, it is critical that the Government delivers a fair and decent pension which allows them to enjoy retirement with dignity," said Adrian Thomas of Help the Aged.

"No one over state pension age - either now or in the future - should face a situation where they are economically compelled to work."

Last will and testament

Fri, 16 Dec 2005 16:39:47 GMT

Sorting out wills and legacies in often entangled financial affairs can be a nightmare, and cause rows in one in ten families following a death.

Problems can become even worse when the person charged with executing the will's instructions may be struggling with grief or unprepared for the job.

"The process can take between six and nine months for the typical estate where there is a property involved. It can be an onerous task," Nick Robshaw of HSBC told This is Money.

The first step is to work out the size of the estate covered by the will.

"Finding the assets can be a challenge. Some people leave a list or register of what they have. But others leave no indication of their wealth," says solicitor Janet Kyriacou.

Sending a copy of the death certificate to any financial company concerned will let the firm know what has happened and who to contact. Professional valuers can estimate the cost of property, jewellery or antiques.

Once the wills and estates value has been worked out, along with a tally of taxes and debts, an executor must arrange matters with the taxman.

Inheritance tax is charged at 40 per cent of any estate worth over £275,000. Requests to a spouse or charity are exempt, however. Payment of tax is due six months after the death, although instalments may be arranged when wealth is tied up in assets.

After the tax man has been dealt with, a Grant of Probate allowing the executor to take control of the assets must be obtained. Finally the will may be distributed.

"You will need to set up an executor's bank account to receive money and arrange for shares to be sold or transferred into the names of beneficiaries," said Mr Robshaw.

"Administrators and executors must also keep a detailed record of money they receive and pay out."

£1.6 billion lost in poor tax planning

Fri, 11 Nov 2005 15:55:34 GMT

Poor inheritance tax planning is set to cost UK families £1.6 billion through 2005. This is a £400 million increase in the past year alone says IFA Promotion, who issued the research.

Inheritance tax is levied on estates worth over £275,000, charging 40 per cent of anything above this amount, including any gifts made up to seven years before the deceased died.

Rising property prices mean that 3.6 million estates will become liable for the tax by 2009.

"People need to be aware that the inheritance tax threshold has failed to rise in line with soaring property prices over the last few years and that you don’t have to be rich to be subject to inheritance tax," David Elms, chief executive of IFA Promotion told My Finances.

"It's vital that people seek out advice from an independent financial adviser, so they can make informed decisions when it comes to inheritance tax planning and avoid wasting their precious inheritance unnecessarily."

To help minimise the impact of the tax on them, people are advised to hold life insurance policies in trust, plan their estate, ensure their wills are fully drawn up and that their executorship is in order.