Later life planning

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The State Pension age this year becomes 65 for both women and men. Between December 2018 and October 2020, it will rise to become age 66. During the two years from 2026 to 2028, it will rise again to age 67, and further increases in retirement age are planned, but the dates are not yet confirmed.

Some people may be able to retire before they reach the age at which they are eligible for a State Pension, but the Daily Mail newspaper reported on the 8^th of September 2017, that a record 1.2 million (one in ten) continue to work beyond the age of 65. The reason given by the majority of those still in work is that they are unable to live on any pension they receive and, therefore, need the money.

Take a look at the age to which the average person in the UK is likely to live, and it may be easy to see why a sufficient income in later life may be such a worry.

In the latest figures released by the Office for National Statistics (ONS) - a man now aged 65 may expect to live a further 18.5 years and a woman 20.9 years. 20 years of life in retirement may prove difficult for many people to fund. And increasing life expectancy is likely to make the situation more difficult still; a male born today has a 21% chance of surviving until past the age of 90, and a female a 32% chance.

Pension planning

How much is enough when it comes to your retirement income? What figure are you likely to have in mind for pension planning purposes? It all depends, of course, on your means, circumstances and lifestyle choices.

A study by Research Plus, on behalf of Prudential, published on the 12^th of January 2018, found that the average annual income for those now entering retirement is expected to be £19,900. That figure has been rising for the past five years, to reach the highest average recorded by the researchers during that period and represents an impressive 10% more than those who retired in 2017.

Nevertheless, it might also be noted that the sum of £19,900 is only £1,200 more than the average retirement income of £18,700 a year for those who left work in 2008, immediately before the financial crisis of 2008.

Between 2008 and 2018, however, an online calculator showing the effects of inflation, shows that the cost of living increased by 29.4% - so, if you were to achieve the same buying power as your £18,700 in 2008 at today’s prices, a retirement income of £24,196 would be required.

Unsurprisingly, therefore, about a half of those surveyed doubted whether an annual income of £19,900 is going to lead to a comfortable retirement, whilst more than a quarter (27%) were certain that it is not going to be enough.

Retirement planning

Insufficient financial planning and provision for a comfortable retirement, therefore, takes forethought, care and attention in advance – with the object of storing up sufficient funds for when you are no longer working and must rely on your pension and other savings. But saving up for a financially comfortable and secure retirement is not something you are able to do overnight.

The lesson to be learned from just this handful of statistics, therefore, suggests that the sooner you start your retirement planning and pension planning the better.

Later life planning is likely to involve a serious and careful consideration not only of how many more years you might hope to live, but very many more complex factors:

• what pension arrangements have you already made;

• what is the estimated value of your pension pot when you choose to retire;

• have you considered any further investment planning – for savings you have already made or to be used as you draw down your pension entitlements;

• have you considered your options for a phased drawdown of your pension entitlements and whether the purchase of an annuity needs to feature in those plans;

• do you own your home, will you continue to rent, or are you considering downsizing to a smaller house;

• does equity release offer a way of unlocking some of the capital in the home you own, allowing you to continue to live there, yet giving you access to a significant cash lump sum to supplement your retirement income – an equity release calculator may help you find out the amount you might release in this way;

• are there any lifestyle changes you intend to make once you give up work and become retired;

• what is your current state of health – you may have health insurance to cover acute healthcare needs, but have you made any provision for the longer-term care and additional support you are likely to need as you grow older;

• if you have a spouse, partner or dependent children, what financial provision have you made for them when you die;

• what financial legacy do you hope to leave to your heirs and loved ones;

• have you taken advice on inheritance tax planning or considered ways in which your tax liabilities might be lessened;

• have you made any arrangements for your funeral – comparing the benefits of different prepaid funeral plans, for example?

Later life planning

When you retire, you have every chance of living many more years – if you are 65 when you do so, around 20 years is the current average. Your retirement life is likely to be centred around living as healthily and as enjoyably as you can, whilst maintaining the mobility and mental capacity to take all the holidays you promised yourself and pursue the hobbies dear to you.

Achieving those goals depends on the extent of the retirement planning you have done in advance. Whilst it is never too early to start the pension planning and investment planning that is called for, as your retirement date approaches there are still likely to be choices to be made. For this, you may need independent financial help and advice that allows you to compare your many options for the ways in which you may optimise your income for a financially secure and comfortable retirement.

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