This case study looks at how a RIO could improve their home.
This case study does not represent real people and is for illustrative purposes only.
Barry is 70 and retired from his job as an insurance broker. Fiona is 65 and retired three years ago from her job as a secretary, but has chosen to supplement her income by working part-time as a retail assistant at Stansted Airport.
Barry, because of his former career, is quite financially-savvy. He has been investing in a Self-Invested Personal Pension (SIPP) for a number of years, which he uses to draw an income from. He also took a lump sum at retirement to treat his family to a big holiday. Fiona has invested in a personal pension for a number of years, which she has used to purchase an annuity.
They also own an apartment in Spain outright which they use for regular breaks.
Barry has contacted his Financial Adviser and they've had a face-to-face meeting to conduct a fact find. They're awaiting a full recommendation.
They've paid off the mortgage on their four-bedroom detached home in Chelmsford. But they've ambitions to build an extension, which would include a bedroom and en-suite bathroom for when their children and grandchildren visit. They're also aware of the pressing need for some repairs as the double glazing needs replacing throughout the home, they'd also like a new kitchen and to replace all the carpets.
The house renovations have been quoted at £130,000 and they're happy to invest some, but not all, of their savings to help cover the cost.
House value: £580,000
Second property value: £140,000
Barry's SIPP: £210,000 (Annual income £7,350)
Fiona’s annuity: £8,000 after tax per annum
Fiona's job: £7.000 after tax per annum
Combine State Pension: £13,000 a year
Joint whole of life insurance policy: £75,000, pays out when either of them dies
Living expenses: £2,000 a month
Your client should think carefully before securing other debts against their home. Their home may be repossessed if they don't keep up repayments on their mortgage.
Their ability to make the payments may be affected if:
Taking out a mortgage in later life could limit their future choices too. For example:
This website is designed to give professional financial advisers information and tools that they can use to help control and develop their business and should not be relied upon by private investors or any other persons.