Cup of tea ends with a sour taste

The other day some friends invited my wife and I in for a cup of tea. Over the next hour or so they opened up over their financial woes.

It struck me that their story encapsulates the plight of a growing number of families, so - having extracted their permission and preserving their anonymity - I will share their story.

He is 58 and should now be looking forward to a comfortable retirement but instead faces worrying months or possibly years on a low income.

A chartered surveyor by profession, he is to be made redundant. Some people might relish a juicy pay-off at this age after around 20 years' employment.

Unfortunately he has just finished privately educating his son and still has a £100,000 interest-only mortgage hanging around his neck.

His wife, who has been sick and took early retirement, can make minimal contributions to the family finances.

His own pension arrangements are minimal. Having moved from one employer to another as a young man, including a period abroad, he failed to accumulate any then. His current employer did not contribute to his pension. While he would have enough to live on without debt, handling that mortgage looks daunting.

Of course, they have no savings.

Their first thought was to trade down to a smaller property. But in the current market conditions they could struggle to sell. The National Association of Estate Agents says the average time from instruction to exchange of contracts is now 24 weeks.

How did it come to this and how did they expect to repay the mortgage? You guessed it - they are waiting on an inheritance. But the lovely lady in question is a fit and healthy 91-year-old who shows every sign of marching on to 110.

I have always found it inexplicable that anyone should pin their mortgage to hopes of an inheritance.

But stranger still is that lenders have allowed people to take interest-only mortgages without clear details of how the borrower intends to repay their debt.

So there you have it: a man of above average intelligence, who has probably never had any sound financial advice in his life; a proud professional, who at a vital time in his life has allowed debt to get the upper hand because no one ever emphasised the importance of saving.

I left their house saddened and with the Micawberesque thought that perhaps something will turn up.

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Ironing out the delays

It's good to see that the insurance industry is finally getting to grips with the unacceptable delays pension investors face when attempting to exercise the open market option.

A computerised system, now being tested, should reduce the maximum time from the transfer application being received to the annuity being paid to 30 days.