Pack up, cash in and sail out

In the penultimate part of our series 'Investing for Life', we investigate buying annuities, raising cash from the value of your home and the pitfalls of moving abroad.

"Will you still need me, will you still feed me, when I'm 64?" As the Beatles generation slides towards retirement, the same anxieties surface as with every previous generation. And the biggest question of them all is, will my pension see me through?

"Will you still need me, will you still feed me, when I'm 64?" As the Beatles generation slides towards retirement, the same anxieties surface as with every previous generation. And the biggest question of them all is, will my pension see me through?

In their desire to obtain extra cash, many people may consider trading down in housing to help them get through their autumn years in style, and they may not even need to move into smaller properties. Homeowners will mostly have built up a valuable investment - especially if they are living in London or the South-east. Those who are confident they could live happily elsewhere may now consider moving to a cheaper area, giving them a capital lump sum to boost their pensions.

House prices are low in some of the UK's most beautiful regions. Properties in the north of England, Wales, Scotland and Northern Ireland are all likely to sell for much, much less than their equivalents in overheated parts of the South. And even the house price surveys can mislead because of the wide variations within a region.

While prices in Edinburgh have risen sharply, in some other parts of Scotland they remain low. There are areas in North Wales where homes are astonishingly cheap - and they cost even less in the economically destroyed (and often unattractive) parts of South Wales that used to rely on mining.

In Northern Ireland house prices are rising quickly in and around Belfast as a direct result of the peace dividend but they are still very low elsewhere. In the Limavady area on the north coast, near to the Giant's Causeway, one of the world's 10 best golf courses and one of the world's top 10 beaches, the council reports that it is possible to buy a multi-bedroom mansion house for less than £100,000.

Others may think of moving abroad. The Irish Republic is less of an option now than in the past as the inflationary effects of a booming economy have been particularly felt in house prices, especially close to Dublin and to a lesser extent near Cork. Homes, though, remain very cheap in Donegal. But more people are interested in retiring to the warmer climes of the Mediterranean.

"It is very difficult to compare prices," says Yolande Barnes, head of research at international estate agents FPD Savills. "It is very much horses for courses. Spain is one of the biggest retirement markets. The 'sunbirds' are hitting the Spanish resorts. In summer they are full of British tourists and in the winter they are full of British pensioners. Where someone chooses does depend on their means. The South of France and the Caribbean are some of the traditional destinations."

Her colleague, Charles Weston-Baker, head of international residential sales, suggests that people consider Malta and Portugal as low cost options, with expatriate communities and excellent climates.

"Malta is particularly good," he says. "We also have a retirement project in the Algarve which has a nearby nursing home. In Malta there is no capital gains tax of sales of inherited property. British pensioners pay a maximum tax on income of 15 per cent and there are reciprocal health arrangements. Malta has reduced its stamp duty to 5 per cent on properties and there are no property rates. The cost of living is about 30 per cent less than in the UK. Property prices are going up steadily by 5 per cent a year, but they are less than in the UK. A two bedroom apartment costs from £50,000 to £150,000. There are a lot of benefits living there."

Whichever country is considered, it is important to assess all round living costs rather than just property prices. Costs are often higher in summer than in winter but many countries in the Mediterranean cost less than Britain (see chart).

An option for those keener on the mild Mediterranean winters than on the hot summers is to take extended winter holidays. Saga, which specialises in travel for the over-50s, offers three month holidays in the Algarve from just £901 (see chart).

One of the factors that must be taken into account for someone spending time abroad in retirement is obtaining effective health insurance that provides cover while abroad. Countries that are members of the European Union provide reciprocal health arrangements, though it is important to fill in a form E111 - available from Post Office branches - to arrange this. These can be completed, and expenses reclaimed, retrospectively.

Only Permanent Health of the cheaper private medical insurers includes, as standard, extensive cover while abroad. Costs and the level of cover varies widely between travel insurance policies and large savings can be made by shopping around, particularly through the internet where some of the best offers are available. Cheaper insurers include Travel Cover Direct (, as well as Columbus Direct (

Unfortunately, ill health is something that simply cannot be ignored in retirement. Ultimately this may result in expensive residential care which can cost £200 a week in the UK. Those who have failed to take out insurance cover prior to retirement can still opt for a policy either through the payment of regular premiums or else by a single lump sum. Increasingly the retired are having to pay for their care arrangements by selling part or all of the equity in their homes, even though this reduces what they can leave as an inheritance for relatives.

Several organisations can be contacted for information sheets or advice on the various forms of equity release schemes. These include Age Concern and Help the Aged, as well as Foundations - an agency which is dedicated to helping the elderly and people with disabilities to continue living in their own homes and avoid having to live in care (see chart on page 2). Foundations is also able to provide odd job workers and will help with negotiations for home adaptations for people with disabilities.

Kevan Marlborough is office manager for Hinton & Wild, independent financial advisors specialising in advising the elderly on the confusing variety of equity release schemes. "Essentially people must realise that all these schemes involve giving up some of the equity in their property," says Mr Marlborough. "They won't get something for nothing, whether it is a mortgage-based scheme or selling some of the equity in the property - which means less in your estate when you die. I would also advise getting independent financial advice from a specialist in the field on equity release. Some organisations will only sell their own products. There may be other ways of getting income without giving up so much of their property. Don't rush into it."

Until around five years ago, most of the equity release schemes for the elderly involved remortgaging homes. These have declined in popularity, particularly as the abolition of Miras, mortgage interest relief at source, last year made it much less financially beneficial. It is now only regarded by advisors as suitable for people in their late 70s or older. It has now become, says Age Concern, "a niche product".

Remortgaging options were also damaged by the scandal of property owners being forced out of their homes after they went into negative equity. It is therefore absolutely essential if remortgaging a property - or otherwise releasing capital - that the contract has watertight protection enabling the current owner, their spouse and any other dependents that the owner wishes to include, to continue to live in the home until they die, with the house only sold after death.

A more common alternative now is the reversion plan, under which the homeowner sells all or part of their equity in the property and continues to live in the house for a nominal rent. The buyer takes the risk that the current homeowner - and spouse - will live a long and healthy life, and if so may well end up being out of pocket. Obviously, the older the homeowner is when they agree the contract the more they can release as capital.

All this underlines the need for sound financial planning before retiring, not least because no one would wish to survive on the basic state pension - which is just £66.75 weekly for a single person, or £106.70 for a married couple.

The gradual shift of burden from state to individual has been consistent in recent years and it looks set to continue. Pensions are now uprated in line with inflation, not with average earnings, which has reduced the income of pensioners in comparison with wage earners. The results of a Government review of funding residential care for the elderly is due to be announced shortly. It is expected that more pensioners will be expected to finance care costs out of the capital value of their homes.

In the future it is likely that fewer pensioners will be able to leave a valuable inheritance to their family and friends. But we will look at inheritance tax planning and writing a will in next week's article, which will be the last in the series and will tackle a subject we often try to avoid - death.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'