FINANCIAL ADVICE WORKSHOP
NOTE OF WORKSHOP BY RUTH WHITEHEAD, IFA
15 March 2009.
A note taken as accurately as possible by Maria. Health warning: do not rely on this information for making decisions – check things out.
Ruth introduced herself as an Independent Financial Advisor (certified PFS with the Financial Services Authority) and a Mortgage Broker (cert MAQ), and with £5m liability insurance(came to OWCH via Marion and Sheila). Normally she either charges a fee for her work or a commission ‘if instructed’ or a combination of the two.
She won the group’s attention from the outset by relating how she, a Bassoon Player, had nearly come a cropper at the last recession, late 1980s/early 90s. She had allowed herself to be persuaded not to read the small print relating to an endowment mortgage and ended up paying the exorbitant interest rates of the early 90s and nearly being repossessed. This had spurred her into becoming an IFA – ‘which isn’t rocket science’. She emphasised that she doesn’t give advice but aims to provide a frame of reference within which women may become aware of their options and make their own decisions about what to do and not do. Besides talking about a number of possible options and answering questions, her main message was a hopeful ‘This recession will end. It’s not as bad as it was the last time round, despite what people say. Property values will pick up again.’ She also said that in her view women don’t take as much care of themselves financially as men do.
- Shared ownership and Equity Release
Purchase of an OWCH flat will be on the basis of shared ownership up to 99%. Ruth advocates consideration of equity release if you will be in the position of being capital rich and cash poor – in which case, for example, you could buy in to the tune of £150k for a £200k flat and take a loan against your property of £50k as income. Unless you are planning to leave funds to the Chancellor of the Exchequer or your children, you should enjoy your income and spend it. Equity release is available for anyone over 55 and can fund a growing income. You have to intend to stay in that property until you die. Don’t change your mind – there are exit penalties. Lenders also do tend to have a somewhat restricted imagination in relation to shared ownership.
SM pointed out that you could also end up with a negative equity dwelling on which you are paying compound interest. Ruth’s view is that ‘the property market is not yet stuffed. This is a temporarily difficult situation’.
JB observed that there may be complications in the OWCH case which might impede equity release. Who holds the freehold is an issue (bound to be one of the housing associations involved) and they and their lenders may not allow a second charge against a property. This we need to check out.
- Buy-to-Let mortgage
One possibility for women unable to afford to buy into the OWCH scheme fully is to take a ‘Buy-to-let’ mortgage against your present home and rent it out to sell later when the property market has picked up. If you are downsizing from a family home, this is a good idea as current law stands. You would need to sell it within three years in order to avoid capital gains tax. You would also need to check out whether the housing association behind the OWCH scheme will permit you to own two properties. Ruth advocates never taking a bridging loan.
To a question about buying an annuity, Ruth responded that rates for women doing this are lower than for men, as they live longer. You can buy a cheaper ‘impaired life annuity’ but you have to be very ill for this. If your pension fund is not more than £15k, this is regarded as a trivial sum and you can probably access all of it.
There was some discussion about being able to buy back contributions that you may have opted out from paying in the past, but it is possible that this has to be done before April 6. CAB would tell you. Cost £460 per year opted out of. Information on pensions can be obtained from the government’s pension service over the phone. From 6 April, the ‘years contributed’ requirement for the state pension is to be reduced from 44 years to 30.
- General discussion
Asked which financial institutions can be regarded as safe, Ruth said ‘be suspicious of accounts with interest rates above the market rate’. Other points were:
- No Irish products
- HSBC ok
- Abbey ok
- Lloyds TSB ok
- Nationwide – still a mutual and ok
- Co-op – ethical and ok
- Triodos – ethical and ok
- Friends Provident - not doing well
- You can save up to £50k and have it protected by current guarantees. You need to be sure that you save each £50k (if you have it) in different banks – be careful of banks that are owned by other banks – you will not be protected for different sums. JB: trywww.moneysavingexpert.com for info on who owns what.
- Ruth advocates everyone who has money in a bank or is a tax payer demanding from their bank an assurance that it will lend her money to other banks to solve the current crisis – or lose her account. Write to your MP. Lobby for this as OWCH.
Not an area of expertise for Ruth. Best to get CAB info and advice.
Ruth extended the offer to all present of one free hour of her time. Any other OWCH member wishing to avail herself of this should contact Marion Virgo.