With State pension funds getting smaller and household costs getting bigger, your pension pot may not bring you the lifestyle that you really want. So how else can you boost your income to pay those bills and have the holidays that you craved when you were working?
You may find that you want to help your children out with university fees, a deposit on their first flat or a wedding. This may use some or all of your ISAs or any other investments you have or may eat into your pension fund if you have already retired.
So, if you own your own home, then there may be a way to help you fund what you wish to do. It depends on whether you need a lump sum or wish for a regular income.
If you wish for a regular income, then there are equity release schemes on the market that allow you to do this with your home.
Another way is to invest some of a lump sum into an annuity which will pay out a monthly income. If you take a lump sum, there are may options to choose from, which include a one off purchase, putting in your pension pot as you will get tax relief, putting it into a savings account so you can spend it when you need it, or investing it in the stock market.
What about downsizing?
If you find you and your partner rattling about in a large family home, which is bigger than you actually need, then it could be that a smaller property would be better for you. You may also be happy to move to a cheaper area now that you don’t have to worry about the school catchment anymore!
Whatever your reason, selling your home could release a good amount of funds with the difference in price between what you sell your current house for what the new one costs. Remember to take into account the cost of moving such as estate agent fees, solicitor’s fees and stamp duty.
Also, take into account that a smaller home will come with cheaper energy bills and lower council tax. There’s also the added bonus of less cleaning!
What about Equity release?
If you really don’t want to move home, maybe your family stay a lot or you are looking after grandchildren, then there is another option called Equity Release Scheme.
Most schemes allow you to borrow money using your home as the security. In essence you are lending some of your home’s value to a company and the scheme will get their money back when your house is sold, more often than not at your death, or if you go into a nursing home.
There are different types of Equity Release schemes and it is worth researching them before you make your decision. Remember you will be reducing the amount that you will be leaving your family in your will and they can be expensive to buy.
It’s worth taking into account that if you increase your retirement income, this can have a knock on effect with any benefits that you might be entitled to such as tax credits, pension credit, child tax credits or housing benefit.
Talk to a financial advisor to make sure that you have looked at all the implications doing this may have on your financial circumstances.
A secured loan allows you to borrow against the value of your home, or you could get an unsecured loan, but you will need to pay them back.
You could dip into any savings or investments that you have. Doing this will be cheaper in the long term and they are less risky options.
You could take in a lodger. If you have unused bedrooms in your home, it may be worth thinking about taking in a professional person as a lodger. It is possible to earn up to £4250 a year in rent tax free through the government’s Rent a Room scheme. Of course this is a risk and you need to be sure that the person you take in will respect your home. It’s worth talking to friends as they may be able to recommend someone first hand who is looking for somewhere to live.
Lastly, make sure that you are claiming all the state benefits that you may be entitled to. There are many people that think they don’t qualify who are missing out on that useful extra cash.
Whatever you decide to do, make sure that you seek advice and make sure that you can pay any money back that you borrow and ensure that you are not giving your children a debt that they cannot repay once you have gone.