Great New Idea For Saving For Old Age

[dr ray]

My mother in law (in her 70s but fit and active) has a large, mortgage free house. Are there any rules stopping her selling the house to he daughter for a nominal amount and then the daughter renting it back to her (rent which she would get paid from the council)?

You cannot intentionally make yourself poor to avoid tax and get benefits so she can't sell it for a nominal amount and she would have to pay a market rent.

The traditional way to deal with this is for her to sell the house and give you the money. She would take out a 7 year reducing life policy so that if she died in the first year, say, the money the estate pays in inheritance tax is covered by the insurance payout. At seven years the gift is exempt The insurance is expensive but not as expensive as 40% tax

Problem is that people dont trust their family to look after them if the situation arises especially where there are partners involved (any money she gives your wife becomes yours too and your new wifes should your marriage fail). The money can be put into trust but this is where it gets too complicated and expensive for me. Especially as the government changes te law every few weeks to make this sort of tax planning impossible.

We had just that problem and now we have to pay 100s of Ks to the government in tax.

You do need to do something because I don't think I would be sticking my neck out in predicting she will, unfortunately, die sometime in the next 30 years or so.

A few gold coins bought over time can be hidden from the HMRC and she would still have control over the assets

[Minos]

Well, let's put it this way; I'd rather not count on anyone doing it for me.

The only boat I plan to be on is the one out of here if it gets too bad.

One of the biggest regrets I have in life is that my parents taught me to be decent and self sufficient. I'm giving serious consideration to selling up and blowing everything on a good time for the next 20 odd years. After that I'll be too knackered to work, get signed off, get a house from the state, some cash and live out my days with my memories.

If the state doesn't provide enough I'll vote for the party that promises to steal the most from you and your decedents to give to me and my fellow wasters.

[bomberbrown]

I sympathise, but may I suggest there is a better option?

The issue is to safeguard hard-won wealth from the British state thieves, right? One option is not to have any wealth, but that's a n extreme solution and will land you in desperate trouble later in life because nobody else will atke care of you.

I suggest developing stores of wealth that are outside of their control. That means foreign assets held in places where their state is less likely to pinch it. It doesn't necessarily mean great yielding investments, because we're talking about safeguarding not making brilliant returns.

My own favourite is land in foreign places, although that yellow stuff you're not allowed to talk about here also qualifies.

Some good advice there bogbrush, thanks.

[Minos]

My mother in law (in her 70s but fit and active) has a large, mortgage free house. Are there any rules stopping her selling the house to he daughter for a nominal amount and then the daughter renting it back to her (rent which she would get paid from the council)?

[MSE Mode on] Have you checked www.whatthefeckamientitledto.co.uk? [MSE Mode off]

[tegan]

It simple. You can a huge chunk of your salary to AIG, they lose it gambling on some new unfathomable financial derivative, you pay to bail them out with your taxes by getting off your sick bed at 75 and working in Macdonalds.

[Elizabeth]

A radical new idea is being put forward in a Green paper today which would have people take out something called "insurance" for their care in old age.

http://news.bbc.co.uk/1/hi/health/8148116.stm

The plan involves paying significant sums of money to insurance companies throughout your life which they won't gamble away in CDS speculation and the like, which will pay for the care that you thought you were paying for in taxes through your life.

The idea would suplement the existing system whereby if you lived a careful life and had a house at old age you get it ripped from you to pay for care, thereby encouraging anyone thinking it through to MEW for fun and squander everything on holidays abroad.

Although likely to be warmly received by the insurance industry, there are some questions being asked about exactly what it is we pay taxes for, apart obviously from EU contributions, US Army truck seconds and recapitalising banks.

Concerns have also been raised that the insurance companies may not retain the funds to pay the care, but the government has countered that this will be underwritted by "new investment" in old age health care by the government. This is likely to be unaffordable in the future, prompting calls for further insurance schemes to be developed to insure against the risk. The final plan is likely to include a provision whereby your entire salary is routed to the insurance scheme, requiring the wage "earner" to claim income tax credits against contributions, just so they remember who it is who pays for their living.

Scotland will not need this system as their old age care is currently paid for by English people.

This sounds to me like a typical British New Corporate Not Labour (BNCNL party) finance scheme with all the complexity and smoke and mirrors as well as the long term sting in the tail that typified the sub-prime insurance debacle that brought down America only just recently. So what actual purpose does national insurance achieve? Oh, you mean its just another tax?

[Elizabeth]

My mother in law (in her 70s but fit and active) has a large, mortgage free house. Are there any rules stopping her selling the house to he daughter for a nominal amount and then the daughter renting it back to her (rent which she would get paid from the council)?

1. Never get into these tricky dicky situations with a relative. With the best of intentions, someone can go mad and decide they don't like their mum anymore... and you always think that the people you love would never do that, most wouldn't, but its impossible to pick. Take it from the wise, horrified and broken hearted.

2. The housing benefit rules are such that you would likely come a cropper.

3. You would need to watch other tax and inheritance laws to make sure that the 'nominal sum' was considered an appropriate sum to avoid gift and inheritance tax.

[bomberbrown]

One of the biggest regrets I have in life is that my parents taught me to be decent and self sufficient. I'm giving serious consideration to selling up and blowing everything on a good time for the next 20 odd years. After that I'll be too knackered to work, get signed off, get a house from the state, some cash and live out my days with my memories.

If the state doesn't provide enough I'll vote for the party that promises to steal the most from you and your decedents to give to me and my fellow wasters.

I know exactly where you're coming from Minos. Amen to that brother.

[huw]

Here's what I don't get. If old folks have such a problem having to sell their homes to pay for their care, why did they not just give their assets to their children years before and rent the house off the kids on a long-term tennancy?

Assuming the home is paid off, that would mean they go from living rent & mortgage free, to paying market rent. Unaffordable for many, and why should they in any case?

But old folk are just so old-school when it comes to financial matters, they hate to talk about it and would rather "shut up and put up". Then their house is sold and their kids get nothing in the end. Pointless!

Because the children of home-owning parents are entitled to receive the property; they're worth it

They have the option of providing non-medical care themselves, if they want parental wealth preserved.

I've been telling my retired mum for years, to sell her big draughty house find somewhere small and cheap and kit it out with the best insulation then spend the rest enjoying herself rather than just making do on the paltry state pension.

That's more like it

[tim123]

And there was me foolishly thinking that this was what I have been paying National Insurance all my life was for?

Afraid it was (foolish)

NI worked on the assumption that we would all die at an average age of 68. Now that it's 80 odd it doesn't collect enough money.

tim

[General Melchett]

Yet Nanny wants us all to lose weight, drink less, exercise more, and give up the fags so we can all live to be 94, dribbling in our care homes. On top of that, even completely b*ggered nappy-clad dribblers get flu jabs. Why?

In my mother's care home, the best and kindest thing for most of them by far would be a good dose of flu.

Pneumonia used to be refered to as 'The old man's friend.'

These days, targets and misplaced political correctness have displaced wisdom and compassion.

[bomberbrown]

Afraid it was (foolish)

NI worked on the assumption that we would all die at an average age of 68. Now that it's 80 odd it doesn't collect enough money.

tim

But I thought this was the reason NI has been increased over the years by successive governments, no?

[Executive Sadman]

All these things spell less disposible income to be spunked on mortgages.

[Dorkins]

Afraid it was (foolish)

NI worked on the assumption that we would all die at an average age of 68. Now that it's 80 odd it doesn't collect enough money.

tim

The state pension has always been unfunded and paid to today's pensioners out of today's income tax and national insurance. NI was never an insurance scheme, it was a way to remove the stigma of being socially supported out of government funds. It is true that the increased number of pensioners is causing much of the problem, as there are more people being supported by current taxpayers.

If we were to switch over gradually to a real, funded state pension, would it really work? The idea is that if you set up a big government fund which we all had to pay into every month, it would go around investing in productive assets like farms and factories. This would increase economic output above what it would have been anyway, so when the people who paid into the government fund retired there would be extra economic output for them to consume and they wouldn't need to take away consumption from current taxpayers as they do at present. The oldies get to heat and eat and younger taxpayers don't buckle under the strain.

The alternative view is that if you did set up this fund, two bad things would happen. Firstly, the money to be paid into the fund would have to come out of today's wages, leaving people poorer on a day-to-day basis. They would have less money to spend in the economy now, reducing demand for the products of farms and factories today. This would reduce their profitability and lead to less investment in setting up new farms and factories, eventually resulting in a decline in economic output. Secondly, the fund itself would be enormous, meaning that there would be a lot of finance looking for a place to be invested. Given that you have already reduced demand and profitability, it is likely that wherever it goes would not be particularly profitable and yields would be low. The government pension fund would be competing with private finance to invest in profitable ventures, reducing the cost of credit and lowering the interest rate the fund could charge businesses to borrow from it.

Arguably the problem with our economy is not a lack of credit finance to set up new businesses and expand economic output, it is that (1) we have been consuming more than we have been producing anyway, and (2) demand is not high enough to make it worth setting up a bunch of new businesses.

In the situation where you have a funded state pension, when this starts handing out £10 notes to retirees you might find that the fund itself had reduced economic output so that taxpayers, although not having to support the old folks out of current taxation, would be no better off than if the state pension was paid directly out of government coffers as it is now.

Another way to think of this is to consider what a pension actually does. It is a promise from future workers that they will provide you with food and clothing when you are too old to work to provide these things for yourself. If the government was able to invest money today to increase the amount of food and clothing available for everyone (taxpayers and pensioners) in the future (i.e. sustainably increasing the growth rate of the economy), then it would make sense to do so. It is not certain that this is the case, as the economy is probably growing just about as fast as it can anyway. Hence the question is just how workers and pensioners should negotiate over who gets how much of the pie.

Edited July 14, 2009 by bearly legal

[Godley]

So long as the people who save nothing or who pay nothing receive the same in retirement as those who have saved and paid all their lives there will be no incentive for people to make plans and provide for themselves in their old age. The mechanism by which people pay for their pension is an irrelevance in this respect. Without a clear link between contribution and entitlement there will be no incentive to act responsibly - just as the bail-outs for idiot bankers and property speculators have shown. The system will continue to be abused by people from near and far until it is fundamentally reformed.

In short made fair?

[Godley]

If any government thinks that I have not already paid enough tax into my old age then it needs to think again. I now make it my active duty to avoid all taxes in whatever shape or form they take because in my view I am paying far to much tax.

An insurance scheme like this is just another tax, my plan has always been to be worth FA when I retire all wealth will have been transferred to dependants. That will still be my plan unless my wealth pays for a better standard of old age care than some feckless lazy ******* gets.

Same standard of care then I will not be worth a penny making sure I sponge and leech like a selfish parasite in my old age, thus having my **** wiped by the state and my **** wiped by a nurse. Job done.

[huw]

The state pension has always been unfunded and paid to today's pensioners out of today's income tax and national insurance. NI was never an insurance scheme, it was a way to remove the stigma of being socially supported out of government funds. It is true that the increased number of pensioners is causing much of the problem, as there are more people being supported by current taxpayers.

(good stuff snipped to save space)

Interesting analysis. Some thoughts in response...

- Investment in productive infrastructure creates employment and demand in itself.

- UK economy currently over-emphasises consumption at the expense of investment, productive pension investment could help correct this.

- There clearly is demand for capital; why shouldn't PFI stand for Pensioner-Future Initiative?

- "Traditional" investment in productive infrastructure isn't the only option. For example, workers trying to secure a share of future production + students trying to fund an education = natural partners (when education was free, this moral relationship emerged naturally from the social contract).

- More generally, pension money could create intellectual property, securing revenue streams that don't directly rely on physical infrastructure.

[Rich1965]

And there was me foolishly thinking that this was what I have been paying National Insurance all my life was for?

:angry:

+1

[d2thdr]

I hope we can opt out of this rubbish insurance plan. :angry:

[swissy_fit]

A radical new idea is being put forward in a Green paper today which would have people take out something called "insurance" for their care in old age.

http://news.bbc.co.uk/1/hi/health/8148116.stm

The plan involves paying significant sums of money to insurance companies throughout your life which they won't gamble away in CDS speculation and the like, which will pay for the care that you thought you were paying for in taxes through your life.

The idea would suplement the existing system whereby if you lived a careful life and had a house at old age you get it ripped from you to pay for care, thereby encouraging anyone thinking it through to MEW for fun and squander everything on holidays abroad.

Although likely to be warmly received by the insurance industry, there are some questions being asked about exactly what it is we pay taxes for, apart obviously from EU contributions, US Army truck seconds and recapitalising banks.

Concerns have also been raised that the insurance companies may not retain the funds to pay the care, but the government has countered that this will be underwritted by "new investment" in old age health care by the government. This is likely to be unaffordable in the future, prompting calls for further insurance schemes to be developed to insure against the risk. The final plan is likely to include a provision whereby your entire salary is routed to the insurance scheme, requiring the wage "earner" to claim income tax credits against contributions, just so they remember who it is who pays for their living.

Scotland will not need this system as their old age care is currently paid for by English people.

What's all the fuss about?

All you need to do is save the price of a flight to Switzerland.

http://news.bbc.co.uk/2/hi/entertainment/a...ure/8149166.stm

[erranta]

Welcome to the "no frills" economy. Gordon and the gang have taken the cue from the Lairy O'Leary and his championing of the "low cost" model: split the bill into a thousand "optional" extras and you get a headline figure that sounds like a bargain. For "fare" read "income tax". For "care in old age" read "check-in fee". Of course, none of these "options" are anything of the sort, but strangely the public still seem happy to accept them as long as they are promised a fare of 15p to magaluf; Gordon figures he can pull the same con. So roll out the raft of indirect tax hikes and new dedicated stealth taxes - hypothecation to the political class.

Here's a few from the last quarter:

20090324 - Water bills to increase by 50pc more than inflation

20090407 - Water suppliers to raise bills and cut investment

20090423 - Carbon capture could be funded by levy on electricity bills

20090614 - Shipping lines 'aghast' over UK light dues rise

20090616 - Tax to pay for fast net access

20090707 - Passports up by 3 times rate of inflation

20090714 - Health 'Care insurance' planned for old

One of the biggest has been the Brown? VAT on domestic power > Gas/Electric.

With the huge rise in power costs since it was imposed, the Govt tax-take has risen enormously.

It directly affects/targets the poorest - pensioners/dolers and least well paid!

All of these 'payments' were reduced by the +5%VAT drag at a stroke and NOT increased to cover it.

ie the Govt gives - then takes more (proportionally) out of the pockets of the poorest.

I do realise some older pensioners get winter fuel rebate - but no one else does!

Don't forget Gordon Brown's brother works high up in one of these rip-off 'privatised' companies who are saying they have to raise domestic power by another 20% in the next year or so to cover the new meters.

All the meter readers are being sacked, so no more labour cost to the power companies - so all they are doing is screwing us for even more profit!

According to one website, 60% of power costs is profit for the few!

Can't find a figure to back this up though.

[billybong]

One way or another most of this extra money will just end up as bankers bonuses.

[billybong]

One of the biggest has been the Brown? VAT on domestic power > Gas/Electric.

With the huge rise in power costs since it was imposed, the Govt tax-take has risen enormously.

http://www.msnbc.msn.com/id/12400801/

And oil prices are still hovering at around 2005 levels yet energy prices need to drop a lot to get back to 2005 prices.

So people getting another double whammy on price and tax. Surprising there isn't more of an outcry.

[bogbrush]

http://www.msnbc.msn.com/id/12400801/

And oil prices are still hovering at around 2005 levels yet energy prices need to drop a lot to get back to 2005 prices.

So people getting another double whammy on price and tax. Surprising there isn't more of an outcry.

Mrs Bogrush and I were talking about this the other day. We think everyone is just punch drunk now and have given up fighting it.

[bingobob777]

http://www.msnbc.msn.com/id/12400801/

And oil prices are still hovering at around 2005 levels yet energy prices need to drop a lot to get back to 2005 prices.

So people getting another double whammy on price and tax. Surprising there isn't more of an outcry.

the cost of oil is only an excuse on the way up. Then it's exchange rates, storage capacity blah blah blah to keep it up there.

They kept telling us the cost of our gas/electricity wasn't falling as they had hedged the price near the top. None of them seem to have hedged when a barrel cost $35. :angry:

Edited July 14, 2009 by bingobob777