Whether you retired only recently or have been enjoying a well-earned retirement for years, you’re probably totally unaware that you have another pension scheme from which you could be drawing additional income to further enhance your standard of living.

Your Existing Pension

Whether an Occupational Scheme or a Private Pension is the source of your current retirement income, they have both been funded by either you or your employer (or both) over a number of years.  Regular amounts will have been paid into a special tax-free fund which, hopefully, will have built up a large fund for you at retirement.

When you retire this fund is then used to give you a tax-free lump sum and an income for life.

If you are fortunate you’ll have an income which increases in line with inflation so that it’s real buying power is maintained.  However many retirees have only a level pension and, with the huge rise in prices here in the years since the introduction of the Euro, find themselves having to “watch the pennies”.  However retirement should be a time without financial worries and so for many people an additional source of retirement income could be very welcome.

Your “Hidden” Pension

If you own a property here in Spain then you probably own it outright since the usual thinking is that, having had a mortgage throughout your working life, it’s a relief not to have that liability in retirement when your income is usually less than when you were working.

In reality, however, what you have is a large amount of wealth that is actually doing nothing for you other than providing a roof over your head.  Not only that, but over the past few years, the value of your property has been rising very substantially with the result that you now probably have a very sizeable chunk of your wealth tied up there.  This locked-in capital can now, using Reverse Mortgage schemes that have recently become available in Spain, be accessed to generate a retirement income for you in exactly the same way as your pension.

Reverse Mortgages

As the name implies, a Reverse Mortgage is the exact opposite of a normal mortgage.  With a normal mortgage you make regular payments to the institution you borrowed the money from and then, one day, you own your house.

With a Reverse Mortgage, however, we start with the house being completely owned and, by using it as security for a loan where the loan capital is invested at a rate far greater than the cost of borrowing, enable a lump sum - plus an income - to be generated.

For example, on a house valued at €600,000, a tax-free lump sum of €120,000 could be released PLUS a regular income of around €16,000 per annum.  As an addition to your current retirement income this could be very useful.

Reducing Your Inheritance Tax Liability

An additional benefit of a Reverse Mortgage here in Spain is that the value of the property is reduced by the amount of the Reverse Mortgage for Inheritance Tax purposes.  In the example above, a potential IHT liability of over €185,000 could be reduced to just over €7,500 – a saving of around €180,000 or 96% through the implementation of an 80% Reverse Mortgage – in addition to the release of €120,000 in tax-free cash and a regular income of €16,000 per annum.

Conclusion

“You can’t take it with you when you go” so why not make maximum use of your hidden wealth and give yourself an additional retirement income that you didn’t even know you had.  You could also be saving your spouse and/or your children a lot of expense by avoiding what could be a large amount of Spanish Inheritance Tax.

Contact

You may contact Colin McCready at Offshore Money Managers CDS S.L. for further information.  OMM has exclusive access to the most flexible Reverse Mortgage available in Spain.  Contact him on 95 283 09 16 or by e-mail at info@offshoremoneymanagers.net.