Financial Planning in Retirement
Careful financial planning is probably one of the most important activities you make at any stage in your life. As retirement approaches, it is likely to become more important than ever.
It is not only a question of ensuring effective provision for your own many years of retirement, but also to give you comfort in the disposal and distribution of your estate – namely, all the things such as property, other assets and money you own – in the way you intend.
Regardless of your retirement age financial planning embraces a wide range of potential topics, but some of the key turning points are likely to be:
Independent Financal Advice is important
You want to be certain of sound, independent financial advice on a matter as important as financial planning for your affairs in later life.
Given the potential impact of the financial decisions you are making, the role of the independent financial adviser is given sufficient weight by the financial services regulator, the Financial Conduct Authority (FCA), that such services are regulated and authorised by the FCA.
The FCA also recognises that you might be at something of a loss in finding an independent financial adviser – especially if you are looking to use one for the first time.
The FCA itself maintains a searchable register of authorised and regulated independent financial advisers, but also lists those who have been offering services without due registration – these references include clear warnings about the dangers of using an unregistered and unauthorised adviser.
At Over50choices, we are authorised by the Financial Conduct Authority (FCA) who regulate the financial services industry in the UK. This means that you can be sure we comply with their rules and guidance and that you are treated fairly.
As an authorised company, we cannot recommend or give advice on specific products but we can provide information to guide you through your options and help you make the right decision for you.
If you are looking for more guidance about specific products, some of our partners are authorised to give advice and are on hand to help. We will make it clear on our website where this service is available.
Alternatively you can search for an IFA in your area at www.unbiased.co.uk who have the largest selection of qualified financial advisers, pensions experts, mortgage brokers, accountants and solicitors; the service is free to use and you be sure that all companies are regulated by the appropriate authority.
Arranging your Will....don't leave it too late
Elsewhere on our site, we have spoken about the importance of making a will in the process of estate planning – ensuring that your assets (your home, say), your possessions and your money all go to the individuals you choose.
Making arrangements for the probate services that are likely to be needed plays a similarly important role in this process.
Probate is also known as a “grant of representation” and is the legal authority giving someone the right to manage your estate when you have died. As part of that legal process, all the property, possessions and money forming your estate have to be gathered together so that outstanding debts and tax liabilities may be met and the bequests are honoured.
Probate can be a complicated and lengthy process, so any planning you do beforehand helps to avoid any doubt and smooths the way for your last wishes to be realised straight away.
Visit our dedicated Wills and Probate section for more information.
Inheritance Tax Planning
Benjamin Franklin summed it up in the 18th century, when he said “in this world nothing can be said to be certain, except death and taxes” – and nothing illustrates both certainties quite like Inheritance Tax.
Subject to allowances and financial limits, Inheritance Tax is the proportion of your estate that you must pay to the Inland Revenue when your affairs are settled after your death. Once any debts or outstanding payments have been made, the liability for Inheritance Tax may significantly impact the amount you leave to beneficiaries, so minimising that liability may be an important element of your financial planning.
It is why we have suggested a number of ways in which you might lessen your liability for Inheritance Tax – such as leaving everything to your spouse or partner, making gifts to family or friends, making donations to charities, and transferring certain assets (including a whole of life insurance policy) into trust.
Until the end of this current financial year (2017), your estate is granted a tax-free allowance of £325,000, and any amount above that sum is subject to Inheritance Tax at the rate of 40%.
Beginning in the next financial year, 2017 to 2018, you are granted a further Transferable Main Residence Allowance (TMRA) of £100,000, which is added to the basic allowance. TMRA then increases each year until 2020/2021, when it reaches £175,000. By that date, therefore, your allowance before Inheritance Tax reaches a total of £500,000. The effect of these changes is illustrated in a simple table published by the BBC in April 2016.
The advantages of your estate passing to a spouse or partner are also outlined in an official overview of Inheritance Tax, which shows how any unused portion of your current allowance of £325,000 may be passed on to your spouse or partner – making a total potential allowance of £650,000. When you add in the further benefits of TMRA, a couple’s combined allowance might be as much as £1 million, come the financial year 2020/2021.
Planning for any future liability for Inheritance Tax, therefore, is not only important, but may also be complicated and involved. To ensure that your plans achieve your intended consequences, seeking independent advice may be your next step.
For more information on inheritance tax planning why not call the team of experts at Over50choices Legal Services on 0844 880 2087.
Is Equity Release right for you?
This is a way of unlocking some of the cash (equity) you are likely to have acquired in the home you own, so that you may use the cash for more immediate purposes.
Releasing equity from your home has become more popular in recent years, with more safeguards and protection, but clearly there are implications of you doing this for your family; so if you are considering it as part of your financial planning for the future, it is important that you understand fully exactly how does equity release work.
For example the equity loan is only paid off when you die or move into a home and your property is sold, therefore there will be less to leave to family in your Will; this of course is balanced with you having sufficient income and cash to live your later years in the way that you want to, after all you have worked for your money.
So if you are wondering about the pros and cons of equity release, whether it is it suitable for your particular needs and exactly how much equity release can I get, take a look at our what is equity release section for more details.
Planning your funeral
Not something that maybe top of your list, but it's one of those plans that once you have put in place you can forget about it, potentially saving your family money and the stress of arranging and paying for a funeral when that time comes.
We have an extensive section on the site where you can compare funeral plans, but in summary a plan will enable arrange your funeral freezing it at today's prices; the average cost of a funeral has doubled since 2004 from £1,920 to £3,897 in 2017 according to the SunLife annual cost of dying report. For more information on average funeral prices, take a look at our ‘How much does a funeral cost’ section
If you are interested in setting up a funeral plan make sure you read our "are funeral plans safe" section as not all pre-paid funeral plans are the same, so it's worth making sure you are comfortable with your plan choice.