Help - uncle with lots of debt & teacher pension

[tiredmum2468]

Dear All
I'll cut to the chase
Partners uncle is very unwell - he's a
Batchelor only family is my DP and he's asked if we'll help him get his affairs in order
Basically - DP has worked out at 71

He has a car on PCP paging approx £450 a month for (within budget but now an issue potentially he's 2 years into the 5 year agreement) it's a very expensive x5 bmw

He has about £10,000 over 2-3 credit cards

Fortunately mortgage free

He lives on state and teachers pension

No savings but he likes to "live" so always had nice food and holidays and a nice car etc...

He owns his house but his wish is that (this has already been willed to my 2 DC ) with the idea it's rented out and the rent is split equally into accounts for them both as savings for university - we'd have to modernise the house to make it rentable realistically

He can't find his teachers pensions paperwork and he said he can't remember (he retired at 65, 6 years ago) whether a lump was payable on death and what happend as he'd only drawn on it for 6 years

Can anyone offer any help or advice?

You normally get your lump sum when you retire.....not when you die with a public sector pension

@Kitkat151
That answers that then I'm guessing he spent it on one of his many cruises - good for him he's had some great times holidaying and I'm pleased he has.

We're going to suggest that maybe he clears the debts
And stuff now and sells the house and then goes Into a rental for a
While and we will bank some money for the children instead

I doubt anyone would want to rent a house that has had
Nothing done in 40 years not even double glazing 🤦🏻‍♀️

He should contact the Teacher's Pension, they will have his details.
www.teacherspensions.co.uk/public/contact-us.aspx

@Kitkat151
Sorry I don't know much about pensions

So if someone has only drawn on their pension 6 years but paid in from age 22-65 (43 years) does that money just get absorbed back into the system or will his estate be awarded anything?

@user1471446478
Thanks for the link that's great

If he is very unwell and struggling with everyday activities and mobility then he should look at claiming Attendance Allowance which is a longer term disability benefit for people over state pension age. If his prognosis is less than 6 months then this can be speeded up if his health care professional can issue the appropriate form.
Speak to CAB for pension advice - they have a pension wise service he could access or could refer to one.
If he has cancer then Macmillan support line can advise on debts and loans- they have a financial guidance team.
Is he getting single occupancy discount on his council tax?

www.teacherspensions.co.uk/members/once-retired/death-benefits.aspx

Says here that if you die within 5 years your family get a lump sum but not beyond that, so your DP’s uncle’s pension will die with him.

But the best thing to do is contact them to check.

Your advice sounds terrible. Sell the house to keep money aside for the children and then have to pay rent? Sounds like you are trying to ensure the children have an inheritance rather than ensuring he is financially sound. If he has state and teacher’s pension, he can use this to pay his debts over time.

[quote tiredmum2468]@Kitkat151
Sorry I don't know much about pensions

So if someone has only drawn on their pension 6 years but paid in from age 22-65 (43 years) does that money just get absorbed back into the system or will his estate be awarded anything? [/quote]
If he has designated a person for it to be passed on to then they will be paid it usually. Not sure how it works with no spouse, but assume it can go to next of kin.

It probably had a 5 year guarantee so now thats passed there will be no lump sum on death.if he has no surviving spouse or financial dependents nothing will be payable on his death.

Teacher’s Pensions have a useful website so you need to get him signed up to that and it should spell everything out clearly on there. Or if not at least gives him a starting point for looking into it more.

Knowing his type (and having been that type myself) there will be a pile or piles of paperwork to spend an afternoon sifting through. It will almost certainly include a relatively recent pension statement. Probably unopened.

At the very least if you have his National Insurance number the info can be obtained from the pension company. Have a list of questions ready and call them in the presence of the uncle so he can authorise them to talk to you. Likewise the car company.

Being blunt, when the time comes, if there is no cash, the property may have to be sold to settle any debts. The proceeds can then go into trust for your DC.

Good luck

[quote tiredmum2468]@Kitkat151
That answers that then I'm guessing he spent it on one of his many cruises - good for him he's had some great times holidaying and I'm pleased he has.

We're going to suggest that maybe he clears the debts
And stuff now and sells the house and then goes Into a rental for a
While and we will bank some money for the children instead

I doubt anyone would want to rent a house that has had
Nothing done in 40 years not even double glazing 🤦🏻‍♀️[/quote]
You need to consider that any money from a house sale could be used to fund care if he needs carers come to him or to go into a Nursing home.

No lump sum on Death...maybe he’s already spent the lump sum he would have got when he first retired

He might consider an Equity Release (check with a financial advisor - there are some sharks out there). It could clear his debt and maybe pay for some renovations to the property so he can enjoy it for his lifetime. It is repayable on his death or if he moves to sheltered accommodation but is a debt on the estate so can reduce IHT.

Log on the the TPS website , it’s helpful to have the reference number but if you have the NI number they should be able to track him down . It’s likely that if he only retired 6 years ago he would have had a lump sum , however once you apply to get your pension they calculate and pay the lump sum automatically. Are you sure he hasn’t spent it ?

If you sell the house and he needs care down the line then you will have to return the money....it’s deprivation of assets....councils are very hot on this

@MathsFiend
It's not that at all I dont care if my kids don't get anything but that's his wishes they do
We're not able to pay off debt or take on an expensive PCP and his house wants thousands spent on it to make it rentable which again we don't have

DP suggested to him if he sold it, paid everything off then started again - he'd benefit long term in a serviced apartment or something which he isn't adverse too

He has a reasonable income but unfortunately debt aswell were just trying to work out what to do really.

He can only give money away and not have to take it back for care...if at the time he gives it , he is in good health

why on earth would he sell a mortgage free house and start renting? this is SHOCKINGLY bad advice!
i suggest that you gets someone who actually has a clue about money management to help him!

His plan of the house being rented out doesn't work. I would advise to sell, he clears debt, which isn't substantial, and lives on it for now. If there is anything g left for the dc great, if not, that's life.

Pumping money into a house that you don't have which may need to be sold to pay off his estate makes no sense.

This would be my plan.
Claim Attendance allowance -if awarded highest rate ( which he may be straight away if terminally ill ) - this would pay off most of the car loan payment each month.
I wouldn't worry about the debts unless they are really bothering him - he must be able to pay off some each month though from a teachers pension and state pension and no mortgage ???
Have a good look at his budgeting if he will let you look at bank statements- where exactly are his pensions going ??

@Antiqueanniesmagiclanternshow

Because it's a huge 5 bed house with a giant garden and outhouses etc
On a big bit of land

Another alternative is selling to buy a smaller bungalow or something

It could be amazing but he's not well enough to do it all up really

The lumps sum will have been paid. With no married or common law partner the pension is reabsorbed.

Is there any way the car can be handed back?

A full occupational teachers pension based on about 45k should be around £18-20k per annum plus his state pension of about £9k, so about £25k p a. He ought to be clearing about £1700pcm and without a mortgage have £1250pcm. I don't know what his outgoings are but assuming community charge, council tax, insurance, phone, sky, etc, in a modest property I'd estimate £550, leaving £750, allow £300 for food and that's £400pcm off the debts.

What is the house worth?

Under no circumstances should he sell the house.

[quote tiredmum2468]@Kitkat151
Sorry I don't know much about pensions

So if someone has only drawn on their pension 6 years but paid in from age 22-65 (43 years) does that money just get absorbed back into the system or will his estate be awarded anything? [/quote]
A teacher’s Pension isn’t the same as a private pension really. He will have received 3 x his salary as a tax free lump sum when he retired, and an index linked monthly pension - this amount is dependent on how long he paid into the pension. He will have had the option of increasing his lump sum and reducing his monthly pension. He will have registered with the TPS if he accessed his pension 6 years ago. If he checks a bank statement it will be being paid in under Teachers Pension on the day before his birthday each month - mine is paid in on the 6th as my birthday is the 7th.
When he dies, this pension will cease as he does not have a partner or dependent children. These are the only people a teachers pension can be given to upon the death of the retired person. There is no lump sum payable - whilst he was paying into the pension he would have had death in service benefits that would have paid a lump sum into his estate if he died before accessing his pension.
Regarding his debts, when he dies, any money left in his estate, including his house, will be used to pay them off, the debts don't die with you. So if her were to die tomorrow, the credit cards and the outstanding PCP on his car and any other amounts will have to be paid. His house forms part of his estate so unless he has enough cash to pay these off, his house would have to be sold.
It may be possible for your DP to pay these off so the house doesn't need to be sold, but he would not be able to access any money from the house as its been willed to your children. So he would not easily get back any money he pays out to clear the debts.