Mortgage fears as retirement nears
Sunday 08 June 1997
She currently earns pounds 11,500 a year and has a pounds 21,000 repayment mortgage on her council house in Whitminster, Gloucestershire, which still has 22 years to run. The mortgage payments are pounds 152 a month.
Jean has pounds 2,000 in her bank account but no other savings, and is a member of her employer's pension scheme. This pays a pension related to service - accruing one-sixtieth of her final salary for each year of service. When she retires aged 60 she will have accrued a pension worth ten-sixtieths of her final salary - less than pounds 2,000 a year in today's terms. Jean's pension contributions cost her pounds 58 a month. If she should die, her estate will also be entitled to a payout equivalent to 2.5 times her salary by virtue of her membership of the pension scheme.
Jean says her monthly bills (mortgage, utilities etc) amount to pounds 285 and that she spends the rest of her income. She is worried about how she will pay her mortgage once she retires.
What a financial adviser recommends:
Jean is not untypical of many mothers without partners who have career breaks or start work late in life and then struggle to provide a home and pension.
For at least some peace of mind that there is more money due to come in she should get an estimate of her state pension entitlement - by calling 0191-225 5240 and filling in a form BR19. But her national insurance contributions and income have been such that she will be entitled to significantly less than the maximum (currently around pounds 9,000 a year, including the earnings- related Serps element).
Jean should do a full budget of all her outgoings to see if there is any room for savings. As with all too many people, Jean's income "just seems to disappear" but given the limited number of years she has left working and the burden of her mortgage she should look to make savings.
It seems little thought was given at outset to how Jean would pay her mortgage beyond retirement. She should contact her lender, the C&G, and get quotes on the level of repayments required to reduce the term - say by five, ten and 15 years. But with mortgage rates rising she should be wary of tying herself into higher repayments which then rise further because of interest rate increases. Jean might be better off making occasional extra repayments as and when she can afford it.
This money could also be used to enhance what is set to be a pretty modest pension. She may have to consider moving to a smaller property to reduce her mortgage while at the same time squeezing expenditure to build up retirement savings.
Additional voluntary contributions (AVCs) to her pension scheme are the obvious way of enhancing her pension, but a tax-free PEP would give more flexibility on putting money in and taking it out early if needs be.
Finally, Jean also needs to make her limited savings work harder. She could put pounds 1,000 of her current account money into a savings account, perhaps even a tax-free Tessa, leaving pounds 1,000 to meet day-to-day spending.
q Jean Riley was talking to Bob Brown of Chatterton-Bennett Life and Financial Services, a Stroud-based independent financial adviser and member of DBS, a leading national network of IFAs.
If you would like to be considered for a financial makeover for publication, write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL. Please include details of your current financial situation, a daytime telephone number, and state why you think you need a makeover.
03 July 2015 08:30 PM
Andrew Hagger reveals how to get the most from your plastic
03 July 2015 08:30 PM
One reader purchased the Post Office Travel Money Plus Card for a motoring holiday but discovered it can't be used at self-service petrol stations or autoroute toll booths
26 June 2015 10:30 PM
30 June 2015 05:56 PM
UK consumer groups complained that British holidaymakers face another two years of mobile phone misery before the law comes into effect
26 June 2015 10:30 PM
The P2P industry must do more to shake off an unjustified image of being too complex and risky for the everyday saver, says Andrew Hagger
26 June 2015 10:30 PM
Six of the energy company's customer have cause to blow a fuse this week
26 June 2015 10:30 PM
Derek's portfolio is currently suffering because of his failure to be more ruthless
25 June 2015 08:01 AM
One debtor was given a repayment plan that would have taken 125 years to repay
Challengers are smashing the traditional high street banks when it comes to offering decent savings rates
23 June 2015 11:46 AM
Ignore the new breed of savings institutions and you'll lose interest
NatWest pledged five years ago it wouldn't close the last bank in town. Now villagers have been told the branch shuts in September
23 June 2015 05:02 PM
When the last bank closes, local shops quickly go out of business
19 June 2015 10:00 PM
19 June 2015 10:00 PM
Questions of Cash: The paperwork wasn't right so I was left high and dry with a broken washing machine
19 June 2015 11:00 PM
A reader encountered a problem with a Currys washer/dryer care plan
19 June 2015 10:30 PM
Interest rates have never been cheaper if you want a five-figure personal loan but for lower-value loans it's a very different picture
18 June 2015 12:56 PM
Thousands still waiting for payments to go through
Budget 2015: George Osborne is set to get tough with further cuts in public spending
Bargain Hunter: Our exclusive deal cuts the cost of buying foreign currency by 20 per cent
Five Questions On: GB Energy's new tariff
Simon Read: 'Taylor Swift tickets purchased on Viagogo were cancelled hours before the concert'
Bank-beating exchange rates on your international payments
- 1 Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
- 2 People all over the world are getting semicolon tattoos to draw attention to mental health
- 3 Van driver who comforted Clark Carlisle and called 999 after suicide attempt dies age 24
- 4 James Blunt was special guest on the highest-rating Top Gear episode ever
- 5 Baby rescued 1km out to sea after parents forgot about her
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...
Day In a Page
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.