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Should you contribute towards a pension for your grandchildren?
Derin Clark

Derin Clark

Online Reporter
Published: 01/04/2021

It is no secret that starting a pension as early as possible helps make it easier to save towards a financially comfortable retirement. While many people do not start a pension until they are in full time employment, there are, however, pensions that can be opened when a child is young and contributing to their grandchild’s pension can be a good way for grandparents to help their grandchildren later in life.

To help grandparents decide whether or not to contribute to their grandchild’s pension, we’ve looked at the benefits and disadvantages of starting a pension for grandchildren.

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The best lifetime mortgage rates available during March 2021

Homeowners over the age of 55 who are looking to release equity from their home, but who do not want to downsize by moving home, may want to consider a lifetime mortgage. Over the last few years the lifetime mortgage market has become much more competitive, which has seen rates fall and more flexibility offered in products. While many lifetime mortgage plans have become more attractive, those considering this option should still be aware of the long-term impact it can have on finances and must speak to an independent financial adviser before taking out a plan.

The plans highlighted below are not endorsed by Moneyfacts.co.uk but have been chosen as they offer competitive rates for the scenario that we have selected. It should be noted that other plans are available that offer similar competitive rates but may offer incentives, such as cashback, that suit the borrower’s needs better – as such borrowers should consider speaking to an equity release broker who will be able to select the best plans for individual requirements.

Those looking for more information about lifetime mortgages should take a look at our equity release FAQs page.

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Can I get equity release if my home has cladding?

Leaseholders of flats are understandably concerned that their homes may now be less attractive to buyers and to lenders for mortgages, secured loans and equity release.

The Government has recently committed £4.6 billion towards the replacement of dangerous cladding on tower blocks over 18 metres in height. Those in units lower than 18 metres will not be able to access these funds and instead will need to use special loans to pay for replacement cladding, with monthly instalments capped at £50 per month.

The Government funding has been criticised by those in the property sector and by leaseholders disappointed not to receive more financial support.

Those over the age of 55 that live in a leasehold property are eligible to apply for equity release, but those that have cladded properties may be concerned that equity release lenders might turn them away. The Equity Release Council (ERC), the industry body that represents the majority of equity release lenders, stated that some of their members may require a qualified surveyor to assess the potential fire safety risks via the external wall system fire safety (EWS) process based on guidance by the Royal Institute of Chartered Surveyors (RICS).

RICS announced this week that lenders will no longer need to use the EWS process when issuing a mortgage on leasehold flats of four stories or below, as long as they are not clad in aluminium composite material, other composite materials or high-pressure laminate. Buildings of five or six storeys will also not need the EWS check if they do not have cladding of this type and if cladding is present on less than 25% of the building. These buildings also need to not have stacked balconies or decking of combustible materials.

This will help more than 500,000 leaseholders according to figures from the Government.

The ERC also stated that equity release lenders may also have minimum requirements for the number of years left on a lease and require surveyors to examine properties above a certain height.

Dave Harris, CEO at more2life, a leading later life lender, says: “As with all types of lending there isn’t a one size fits all answer. It is possible to lend on a property with cladding however there are many factors in play including the property itself and the type of cladding used, which need to be considered. At more2life we follow the guidance as set out by Government, fire safety regulators and the RICS and in some cases EWS1 (External Wall Fire Review Form) may be required. Once a property has been made fire safe and/or has the required fire safety sign off in place, we would investigate whether we could lend on the property in relation to the standard factors required, similar to a residential mortgage such as property value and LTV.”

Stephen Lowe, group communications director at retirement specialist Just Group, commented:

“There are a number of factors we take into account when assessing whether we can offer a lifetime mortgage on a property – that’s to protect both us the lender and the borrower who benefits from a no negative equity guarantee. As many flats are leasehold the time remaining on the lease is an important consideration, and of course fire safety is another factor as many flats are in blocks. Since 2016 we’ve asked our surveyors to look closely at any property of more than seven storeys and since 2017 we’ve followed the EWS check that RICS has established and continue to do so. But our overarching approach is to look at each application on a case-by-case basis and we will offer a lifetime mortgage to the customer where we can.”

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Pension error results in £2.7 billion windfall for women retirees

Retired women on the old state pension could be due for a lump sum of an average £13,500 after an error has found that some married women, widows and over-80s have been underpaid for up to two decades.

The Department for Work and Pensions (DWP) estimates that the total cost of repaying the arrears will total £2.7 billion. The DWP is currently in the process of identifying and contacting those who have been underpaid due to the error which occurred after an electronic prompt to consider if an individual’s state pension amount should be increased that requires DWP staff to take further manual action that in some cases did not take place.

Those who were underpaid and who may receive a lump sum payment, along with an increase in their state pension, fall into the following groups:

  • People who are married or in a civil partnership who reached State Pension age before 6 April 2016 and may be entitled to a Category BL uplift based on their partner’s National Insurance contributions.
  • People who have been widowed and their State Pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner.
  • People who have not been paid Category D State Pension uplift as they should have been from age 80.
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The best lifetime mortgage rates available during February 2021

A lifetime mortgage can be a good way for those aged 55 and over to release equity built up in their house without having to move home. While there are benefits to taking out a lifetime mortgage, it can have a long-term impact on finances and those considering this option should speak to an independent financial adviser before going ahead to ensure it is the best decision for their circumstances.

The plans highlighted below are not endorsed by Moneyfacts.co.uk but have been chosen as they offer competitive rates for the scenario that we have selected. It should be noted that other plans are available that offer similar competitive rates but may offer incentives, such as cashback, that suits the borrower’s needs better – as such borrowers should consider speaking to an equity release broker who will be able to select the best plans for individual requirements.

Those looking for more information about equity release should take a look at our equity release FAQs page.

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Recent News

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Equity release or pension drawdown – which option is best for you?

18th February 2021

The pandemic has resulted in many households facing financial struggles over the past 12 months and older homeowners may be considering tapping into their pension pot early or releasing equity from their property to see them, or help loved ones, through the current economic uncertainty

The pandemic has resulted in many households facing financial struggles over the past 12 months and older homeowners may be considering tapping into their pension pot early or releasing equity from their property to see them, or help loved ones, through the current economic uncertainty

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2021 equity release Moneyfacts Annual Star Ratings revealed

17th February 2021

Homeowners looking to release equity from their home can now see the best-rated equity release deals on the market, as the Moneyfacts Annual Star Ratings 2021 for equity release have been revealed

Homeowners looking to release equity from their home can now see the best-rated equity release deals on the market, as the Moneyfacts Annual Star Ratings 2021 for equity release have been revealed

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What does the tax year end mean for you?

2nd February 2021

The key dates and figures for those wanting to plan their personal tax arrangements for 2020 and 2021.

The key dates and figures for those wanting to plan their personal tax arrangements for 2020 and 2021.

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More choice in RIO mortgage deals as market continues to grow

2nd February 2021

With the number of homeowners with a maturing interest-only mortgage predicted to peak during 2022, the latest research revealing that the number of providers offering retirement interest-only mortgages is at its highest level on record will come as welcome news

With the number of homeowners with a maturing interest-only mortgage predicted to peak during 2022, the latest research

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Most Popular Retirement News

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State pension set to rise in April 2021

23rd December 2020

The state pension is rising by 2.5% in April 2021, resulting in retirees getting up to an extra £228.80 a year

The state pension is rising by 2.5% in April 2021, resulting in retirees getting up to an extra £228.80 a year

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Pension error results in £2.7 billion windfall for women retirees

9th March 2021

Retired women on the old state pension could be due for a lump sum of an average £13,500 after an error has found that some married women, widows and over-80s have been underpaid for up to two decades

Retired women on the old state pension could be due for a lump sum of an average £13,500 after an error has found that some married women, widows and over-80s have been underpaid for up to two decades

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Pensioners need a £33,000 a year income to enjoy a comfortable retirement

17th October 2019

In order for workers to enjoy a comfortable retirement that includes holidays abroad, a generous clothing allowance and a car they will need to have saved enough for a £33,000 per year income

In order for workers to enjoy a comfortable retirement they will need to have saved enough for a £33,000 per year income

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Should you contribute towards a pension for your grandchildren?

1st April 2021

It is no secret that starting a pension as early as possible helps make it easier to save towards a financially comfortable retirement

It is no secret that starting a pension as early as possible helps make it easier to save towards a financially comfortable retirement

Read More

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