Navigating Property Finance in Later Life: How Changes in The Economy Impacts Over-55s

September 2024

Welcome back to our blog series dedicated to navigating the complexities of property finance in later life. In this edition, we turn our attention to how the current economic climate is affecting those over 55. We will delve into the recent reduction in the Bank of England interest rate, explore the ongoing impact of inflation, and discuss the latest updates about the winter fuel allowance.

If you are over 55, you might have noticed that things are a bit different now compared to a few years ago. Prices are changing, bills are rising, and it can feel like there is a lot to keep up with. Let us break it down in simple terms, especially about how the current economy is affecting you.

Bank of England's Base Rate

First, let us talk about the Bank of England.

This bank is not like the one you might have around the corner. It is the big bank that helps set the rules for how much interest people pay when they borrow money or how much they earn when they save money.

Recently, in August, the Bank of England decided to lower something called the "base rate" by 0.25%. This means the base rate is now 5%.

What does this mean? If you have a mortgage or any kind of loan, this is good news. The base rate going down could mean that you might pay a little less interest, so your monthly payments could get smaller.

But there is a downside. If you have savings, the interest you earn might also go down. So, the money you save in the bank might not grow as quickly as before.

Inflation and Rising Prices

You have probably heard a lot about inflation. It is a big word, but it just means that the prices of things you buy are going up. Lately, inflation has been going down, which might sound good. But it is important to remember that this does not mean prices are falling; it just means they are not rising as quickly as they were before.

So, what is happening? Prices are still going up, but not as fast. This is better than prices going up quickly, but it still means things are more expensive than they used to be.

Energy Costs and Winter Bills

Another big change is the cost of energy. The energy price cap is a rule that limits how much companies can charge for gas and electricity. Unfortunately, this cap is increasing, which means that the average home will see their energy bills go up by about £149 each year. This is a lot of money, especially if you are already trying to make every penny count.

And here is something else. You may have received a special payment to help with winter heating costs called the Winter Fuel Allowance. But this has been taken away for some people, including about 10 million who do not receive Pension Credit.

Why does this matter? Winter Fuel Allowance could give you up to £300 per year to help with your heating bills. Now, with energy costs going up, losing this money could really hurt.

So, what is Pension Credit? Pension Credit is a special kind of money from the government to help people who are over the age of 66 and have a low income. If you do not have much money coming in, Pension Credit can top up your weekly income to a certain level, making it easier to pay for things like food, bills, and other essentials. There are two parts: Guarantee Credit, which tops up your income, and Savings Credit, which is extra money if you have saved some money for your retirement. Not everyone gets Pension Credit, so it is important to check if you are eligible.

Stretching Budgets Even Further

If your budget is already tight, these changes can make things even harder. For example, imagine you are just £1 over the limit to receive Pension Credit. Because of that £1, you might lose the Winter Fuel Allowance, which could be a big blow to your finances.

But there is some good news: About 800,000 pensioners who should be getting Pension Credit have not applied for it yet. If you are one of them, you might be missing out on extra help.

How to Apply for Pension Credit

If you think you might qualify for Pension Credit, it is worth applying. Here is how you can do it:

• Call the Pension Credit claim line on 0800 99 1234, Monday to Friday from 8 AM to 6 PM. They can help you fill out the application over the phone.

• Apply by post: You can call the same number (0800 99 1234) and ask for a form to be sent to you.

To apply, you will need some key details like your National Insurance number, information about your income, savings, investments, and your bank account details. You can apply up to four months before you reach State Pension age, and the application can be backdated by three months.

Other Benefits of Pension Credit

If you are eligible for Pension Credit, you could also get other types of help, such as:

• Help with housing costs and Council Tax

• Free TV licence if you are 75 or older

• Help with NHS costs, including free dental treatment

• Free NHS dental treatment

• Help with the cost of glasses and travel to the hospital

• £25 Cold Weather Payment when the temperature is 0°C or below for seven days in a row

• Housing Benefit if you rent your home

• Help with mortgage interest, ground rent, and service charges if you own your home

• Carer Premium or Carer Addition if it is paid with Pension Credit

Considering Equity Release?

If you are thinking about using equity release to help manage your finances, it is important to talk to an independent adviser first. Equity release can be a useful tool, but it can also affect means-tested benefits like Pension Credit. Getting the right advice can help you make the best decision for your situation.

You can find more information and locate a trusted adviser by visiting the https://www.equityreleasecouncil.com/find-a-member/advisers/.

Conclusion

The current economic climate is tough for many people, especially those over 55. But by staying informed and knowing what help is available, you can better manage your finances. Do not forget to apply for benefits you are entitled to and keep an eye on changing rates and prices so you can make the best decisions for your situation. And if you are considering something like equity release, always speak to an expert to ensure you are making the right choice.

If you have any questions or concerns, feel free to reach out to us – we are here to help you every step of the way.

Until next time,  

Iain