Before postal voting became really popular, I used to help out on Local and General election days by taking elderly people to vote at their respective Polling Station. On one occasion, I picked up my list and went to a large block of flats where all the people were elderly, and rang the bell. A small voice answered, and I explained that I was there to take her to vote. She said that she had already sent a postal vote as she was practically blind, did not get out much and hardly anybody came to see her. It seemed a “cry for help” if ever there was one, so I offered to pop back afterwards.

As soon as she let me into her flat, she said “I want you to help me find my boy.” I asked her what his name was and she told me the christian name. I asked her what his family name was and she did not know. She had not seen him he was about 14 years old and she had had to put him into an orphanage. He was born in November but could not remember the year but she did remember “Doodle Bugs”. A bit of research here showed that the only likely November when there were doodle bugs around was November 1942. The boy’s father was an American who had worked in the same factory where she did, but he either did not survive the war or went back to the US.

It turned out she had spent much of her life in institutions and one building where she had lived was actually a former workhouse. She could not read or write either and had only ever had cleaning or other menial jobs. Nevertheless she was a very strong character and “giving up” did not really seem to be in her vocabulary. I used to go and see her on Saturday afternoons and would do some shopping for her. One thing I had to remind her of regularly was not to give or “lend” any money to her neighbours as most of them looked better-dressed than she was and seemed to try and take advantage of her. One afternoon I helped sort out years of letters and old bills. One of her treasured possessions was a pink hat that her last husband had bought her for her wedding day.
One summer’s day, my wife and I took her out for a drive to the old workhouse which was now mostly converted into smart flats.

As the weeks went by, I gradually built up a picture of her son but without a family name, I held out little hope. Putting together a coherent picture of the son’s life seemed like trying to do a jigsaw puzzle without the pictures on the pieces. But one day she remembered the family name and asked a neighbour to write it down. She proudly showed the paper to me. There was an obvious mis-spelling, but now at least I could now ask someone. I wrote down every little bit of information I had including his mother’s nickname and sent the letter to the local Registry Office. Three weeks later I got a phone call from them – it was the nickname that clinched it and they sent me a copy of his birth certificate – the father’s name was blank.

The same week, I wrote to the Salvation Army Family Tracing Service sending a copy of the son’s birth certificate. The Salvation Army has access to confidential Government records so can trace people that would otherwise just disappear.

It turned out that the son still lived in the same area, only about two miles from the old workhouse where we had taken his mother a few weeks before. The son came home one day to find his wife crying after reading the letter from the Salvation Army. Shortly afterwards, I arranged for the son and his wife to come to Camden and I drove them down to his mother’s flat.

There was a birthmark which the mother recognised and I left them after about 20 minutes. The son had thought his mother was dead so the letter from the Salvation Army came out of the blue. The mother eventually moved back to the area where her son lived and they had four years together before she died.

This story at least has a happy ending, but the surprising thing is that the majority of people traced by the Salvation Army do not want to be reunited with the parent or relation that seeks them.

http://www1.salvationarmy.org.uk/uki/www_uki.nsf/vw-dynamic-index/79FF668A8768F77480256F19005BE0C0?Opendocument

SKI here means Spending Kids Inheritance and OWLS means Older people Withdrawing Loot Sensibly. The parents of the “baby boomers” want to enjoy what they have now. Where does this leave the following generations?
A recent study by the Joseph Rowntree Foundation shows how attitudes to inheritance and passing on money are changing. www.jrf.org.uk/knowledge/findings/socialpolicy/0385.asp

Only about a quarter of the people surveyed said that they would actually change their lifestyles to leave something to their heirs. An increasing trend shows that some older people want to have it now as if to prove the old saying “you can’t take it with you”. The vast majority (85%) said that they would like to leave a legacy but about half thought it was more important to enjoy life.

Allied to the above is the cost of care. Better health care and the NHS means that more people live longer BUT this sometimes means living with a disability. This means paying for someone to help with personal hygiene, mobility or feeding, for example. The rules around this are complex and interpreted differently by different local councils. An interesting point here is that while someone is in hospital, they are the responsibility of the (local) NHS but as they pass through the hospital doors, the cost of care effectively passes to the local authority. A study by the LibDems a few years ago calculated that about 70,000 homes a year were sold to pay for care.
Residential care can cost £40,000 a year around London and any nursing care would be extra. This can eat up equity and capital and leave little to pass on.

About a quarter have accessed the equity in their home at some point usually via a mortgage with “trading down” (moving to a smaller property) nearly as popular. Interestingly, only about 1 in 20 said that they consider an “equity release” scheme as many thought that these schemes were complex – they have a point here. These schemes are usually annuity-based and with longer life expectancy, this means that the lump-sum or income received for giving up a part or even all of the ownership of the home, is low.

As a rule of thumb I have found that to get a £50,000 lump-sum, it is necessary to give up say, £100,000 of equity and this may appear expensive. The difference represents effectively the accumulated interested calculated over the average life expectancy concerned and the rates are not very attractive to people who are “only” say 70. Telling a 70 year old that they are too young for something raises a wry smile sometimes.

Plans to pass assets on are usually made via a will and not surprisingly, the percentage of people who make a will increases with age. Overall about 30% of people actually make a valid will. But 84% of people over 80 have made a will and the main reason for people not making one is that “they have not got around to it yet”. People still seem to think that they are tempting fate if they make one. A high proportion of people that I have referred to get their wills finally written, have got to the stage where the completed draft sits on the coffee table for months or weeks and then they go off the idea.
I also remember an interesting statistic from 1991 – an average 26% of the people who died that year had made a will BUT only 19% of the solicitors who died that year had made one! When I have mentioned this to solicitors, they have usually said it was probably deliberate.

Another reason why older people maybe hanging onto their homes or assets and appear less concerned about passing something on has been the low level of State pension in this country compared say, to Europe. Since the 1980s, State pensions have been linked to increases in the costs of living RPI rather the National Average Earnings Index, which is typically 1-2% p.a. higher. This means that the real value of State pensions is falling further behind people who are still working. The Pension Credit which is supposed to address this is complex, and for this reason many people entitled to it are put off claiming it. The current Labour government has not restored the link between average earnings and State pensions while it has been in office, although it heavily criticised the previous Tory government for breaking the link.

Conclusion, do not bank on an inheritance too much as your parents may need the money before you do.

For further information on planning your own financial destiny, send me an E-MAIL: george@in2consulting.co.uk

The 5th December announcement that residential property will not be allowed in Self-invested Personal Pension Schemes (SIPPS) stops something that was never going to happen on a big scale anyway and avoids many future lawsuits when people finally woke up to risks of investing in residential property as way of providing their pension. From to the enquiries I received, most people thought that this was a way to make millions tax-free. But would have been a disaster for many.

If one’s pension fund is entirely invested on ONE asset which is mortgaged and where the rent has to be paid by someone else, then this is a very high risk strategy. Around London, there is a glut of residential rental property and renters are becoming very picky – it is a buyer’s market. The yield on rental properties in central London is less than the cost of borrowing. With capital appreciation less likely, what is the point of investing in a market which is saturated anyway?

Property is also illiquid i.e. difficult to sell whereas shares, investment trusts or unit trusts can usually be sold quickly. If one is nervous about the level of the Stock Market or funds generally, one can sell everything and go into cash – renivesting later.

Where residential property is owned via a SIPPS, the owner is the pension trustee company of the pension provider. If the tenant does not pay the rent for 3 months, then the pension provider could provoke a forced sale. The value of the fund entirely depends on the value of ONE asset – supposing the area goes downhill because of planning blight or other social problems? No pension fund manager would invest entirely in one share so why is investing in ONE property a good idea?

Stopping residential property being owned by SIPPS also avoids the can of worms that owning overseas property would have been. Strictly speaking, you can still do this (owning residential property will not be prohibited) BUT the potential tax charges could be 70 per cent of the asset value!

One does feel sorry for serious property investors who have done their homework and spent thousands of pounds on planning for something which was announced as if it was a “done deal”. Another potential client spent £15,000 on rearranging his fine art portfolio which he wanted to own via a SIPPS. He feels very aggrieved and with good reason.

N.B. It will still be possible to invest in residential property indirectly – this has not changed.

There are unit-trusts and other collective investments which invest in residential, commercial, or industrial property, or a mix of these. These investments are much more liquid than owning property(s) directly and surprise, surprise, I have seen two new property funds launched in the last two working days.

STOP PRESS There are tax advantages in holding a Buy-to-Let via a limited company where you would not need to buy an annuity either. E-MAIL me for further details: george@in2consulting.co.uk