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Investment Tips for Pensioners

The recession and credit crisis has hit people on a fixed income the hardest, and pensioners in particular are suffering from rising food and energy prices.

Make your house work for you

There are a few ways in which pensioners can make the most of their investments and assets, though. One good way is to rent out a room. A homeowner can earn up to £4,250 each year from rental income before it gets hit by taxes. Even better, this money doesn’t affect the capital gains exemption, as the house is owner-occupied.

There’s more wealth in the home, as owners might think about equity release to free up a lump sum – either for a one-off big purchase or to earn extra income. This move will reduce inheritance, so anyone considering this should think carefully and get advice from an independent advisor.

Quick cash and comparisons

Cash ISAs are a good idea, as the interest earned is tax-free, and the money is available immediately with no penalties applied. There are several banks or building societies that pay more than six per cent interest on ISA balances, so shopping around is a good idea. Getting cash out of an ISA in a hurry is infinitely preferable to getting a payday loan for examples (see wonga.com for more details.) Payday loans can be useful in a tight spot, but they have strict time limits and can easily snowball you into a dangerous place if you’re not able to pay them back.Ladies 50 more1

Compare, compare and compare again! This is the age of the comparison website, and these sites are saving people hundreds of pounds a year. If a site is accredited by Energywatch, it means it looks at every single provider possible. Saving money on energy has never been more important, as one third of pensioners could soon be in fuel poverty.

Pensioners should also use their capital gains tax exemption each year, as this can prevent a big bill further on down the line. Each individual can make as much as £10,900 in tax-free capital gains in the financial year 2013-2014.

Play the field

Spread investments across industries and global regions so that you don’t suffer too much if one area or sector has a bad year. It’s also important to structure your portfolio cautiously – aim for around 60 per cent in shares and the remainder in fixed interest stocks or bonds. There are also absolute return funds which can offer better-than-inflation returns in the long-term, despite what the market throws at them.

Of course there’s always a downside to playing it safe – you’ll probably never