When it comes to retirement planning, many people aim to budget so that they can enjoy life, but still have enough money to leave an inheritance for loved ones when they’re gone.
However, not everyone has children or family they wish to leave their assets to. If this is the case for you, you may be wondering how this affects your retirement planning.
In this article, we’ll talk about how you can make the most of the money tied up in your property, maximise your pension, and why it’s still important to budget even if you don’t plan on leaving an inheritance.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
How to access the money tied up in your home
If you don’t have any relatives you wish to pass your home to when you die, then there are several ways you might be able to release some of the wealth tied up in your property to boost your retirement income.
Downsizing
Many people consider moving to a smaller home as they approach or enter retirement, whether that’s because children have flown the nest or to access some of their property’s equity. The process of downsizing may free up a decent chunk of cash by selling your home and buying a cheaper one.
If you’re thinking of putting a property up for sale, you can see which agents will do the best job of selling your home, based on past performance, using the GetAgent.co.uk website.
Of course, there are a lot of things you need to consider before downsizing. Managing the process of both selling and buying a home at the same time can be particularly stressful, as are the logistics of moving house. If you are paying off a mortgage on your current home, you will also need to check any redemption penalties you might face, or whether you could potentially port your mortgage. Read more in our article Five questions to ask yourself if you’re considering downsizing your home.
While it is possible to move your mortgage to a cheaper property, your lender may ask you to pay off a chunk of the mortgage or switch you to a higher rate. Read more in our article Moving house with a mortgage – what you need to know.
If you don’t want to shell out for a full property purchase, you could think about renting instead of selling up. However, bear in mind that rents are currently sky-high, particularly if you live alone and cannot share the cost, so depending on how long you live, this could have a big impact on your retirement budget.
Equity release
Equity release is a type of loan that allows you to unlock some of the value of your property without selling your home. Essentially, you receive the money from your provider as a lump sum or regular income, while you continue to live in the property. The term of the loan ends when you die or move into long-term care, at which point it must be repaid, generally by selling your house.
You won’t pay interest on an equity release loan on a monthly basis, like other loans. Instead, this compounds over time and will be added to the amount you owe when the debt is eventually repaid.
Equity release may particularly appeal as an option if you have nobody you wish to leave your home to. Normally, a major downside for people considering equity release is the fact that – while they will gain a significant financial boost upfront – their property will almost certainly be sold to pay off the loan once they are gone. This means that their children or other family members will not be able to inherit your home. If you have no family to inherit your property, this may not be a concern.
However, it’s important to make sure you understand the implications and the potential pitfalls of taking out equity release. For example, any means-tested benefits you receive could be affected. You can learn more about equity release and whether it might be right for you in our articles Equity release – what is it and how does it work? and Eight questions to ask yourself if you’re considering equity release.
Want to speak to a mortgage advisor? Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage.
If you’re looking for expert mortgage advice, you can get a free consultation with an independent mortgage adviser at Fidelius. Speak with a qualified, FCA-regulated, independent mortgage adviser you can trust. Rated 4.7/5 on VouchedFor from over 1,250 reviews.
Maximising your pension if you’re single
Latest figures from the Pension and Lifetime Savings Association (PLSA) show how much more expensive retirement can be for a single person than a couple. They estimate that you will need around £31,300 a year for a retirement of ‘moderate’ quality on your own, compared to £43,100 for a couple.
If this sounds steep, don’t despair – there are a few different steps you can take towards making sure your pension can support you throughout your retirement. Our article Preparing for retirement: Your seven-step pension checklist contains some useful guidance for starting to get your pension into the best shape it can be, but if you are still unsure, you could consider seeking advice from an expert.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
One option you could explore is buying an annuity with your pension pot instead of taking the money via drawdown. This will guarantee you a fixed income for the rest of your life, so if you are satisfied with the amount a provider offers you, it could be a great way to secure your future.
One downside of annuities that many people have to take into account is that, unlike a pension pot, you generally can’t leave the money to anyone. However, if you do not plan to leave any money to anyone, you won’t have to factor this into your decision.
Using a pension calculator is a great way to find out what kind of retirement income you’re on track to receive and whether you might benefit more from buying an annuity instead. You can check out some of the best pension calculators on the web via our article Five of the best pension calculators to help you plan for retirement.
You can read more about your solo retirement options in our article How to plan for retirement when you live alone.
Will you need to pay for care?
If you don’t have anyone to leave money to when you die, this comes with a certain amount of financial freedom. If you do not have any need to provide for others, this may enable you to spend more on yourself in retirement.
Even so, you shouldn’t spend without some thought, as one of the biggest costs of later life can be long-term care. If you don’t have family to help take care of you, it’s very important to have a plan for how to cover care costs, whether this involves a carer coming to your house or moving into a care home.
If the total value of your assets – including income, benefits and pension – falls to £23,250, you can start receiving help with the cost of care from your local council, and they will cover it in full once your savings fall to below £14,250. If you do not intend to leave an inheritance, then in theory you might be comfortable with using up your assets before needing care, as your estate won’t be a concern to you. Be aware, though, that once the council takes over paying for residential care, your choice of care homes will be reduced compared to if you were paying yourself.
Read more about how paying for care works in our article How to pay for long-term care.
Do you need to write a will if you have no family?
Most people write a will so that they can ensure that their assets pass to who they wish when they are no longer around. Typically, this means leaving money, property and possessions to a spouse, children, grandchildren or other family members. If you do not have any immediate family, you may feel that there is no need to write a will.
However, bear in mind that if you do not write a will and have no immediate family members, your full estate will go to the Crown – read more in our article Sorting out an estate when someone dies without a will.
Even if you do not expect to leave many assets behind, you may have someone or somewhere that you’d prefer your money and property to pass to, such as distant family, friends, or a favoured charity. Learn about how writing a will works in our article How to write a will.
Give yourself peace of mind that you’ll have control over what happens to your money and property when you die. A legally-binding will can ensure your wishes are followed and avoid complications for your loved ones at a very difficult time. If you’re looking for somewhere to start, we have partnered with Farewill. They have an excellent rating on Trustpilot and are offering Rest Less members a 20% discount off the cost of writing their will.
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