What happens when you approach retirement?
Retirement is a time in our lives which we all have to consider at some point prior to the event actually happening. There are numerous questions that may arise that you may not immediately have the answers to and guidance and advice may be required such as:
- When should I retire?
- Will I have enough income?
- How will my lifestyle change?
- How can I plan for future?
When should I retire?
There is no longer a compulsory retirement age of 65. This means that you cannot be forced to leave your employment just because you have reached the age of 65. If you wish to work beyond the age of 65 you have the right to ask your employer to let you work on. If your employer does not want you to carry on working then they have to give you six months’ notice of this intention.
Will I have enough money?
Once you cease employment your regular income from your employer will cease. This source of income may be replaced by a State Pension. The State Pension payable will depend upon the number of ‘qualifying years’ you have paid from your National Insurance contributions. In addition to your State Pension you may have made contributions towards Private or Occupational Pension payable. It is possible to obtain forecasts of the proposed amounts you will receive on retirement from the Pension Service, any Private Pension and Occupational Pension. This will enable you to calculate the difference in your future retirement income to your current employment income.
How will my lifestyle change?
Your days will no longer be taken up with the regular routine of going to work and you will be able to do the things that you have put off due to work commitments. The financial change in lifestyle will be the potential reduction in income. Will you have sufficient income for your day to day living, or will you have to look to utilising your capital to subsidise any income shortfall. Are the costs of running your home going to be a strain on your finances? You may wish to downsize or realise capital in your property to provide more capital for future living.
How can I plan for the future?
As you grow older issues will arise that at present you may feel you need not worry about. If you became ill or went into a care home, you may need someone to look after your finances and deal with your affairs on your behalf. Have you thought about who would do this and how this would be achieved?
By executing a Lasting Power of Attorney now you will be deciding who will deal with things on your behalf, should the situation arise. If you do not have a Lasting Power of Attorney in place then someone will have to apply to the Court of Protection to be appointed a Deputy to deal with things for you. This is a lengthy and costly process for the appointment, with on-going costs being paid annually to the Office of the Public Guardian for supervision of the Deputy. There is also the downside that you do not choose the Deputy to be appointed it is down to whoever is willing to apply to the Court for the appointment.
Have you made a Will? Who will inherit your estate? Legislation dictates who receives a person’s estate on death where there is no Will. If you are married it does not mean that your surviving spouse will receive everything. If you are co-habiting, then your partner will not come within the category of people entitled to inherit the estate. Your surviving partner would have to make an application to the Court under the Inheritance (Provision for Family and Dependants) Act 1975 to receive any benefit. By making a Will you decide who receives your estate and deals with the administration.
Do you have surplus capital assets that you do not require and would like your family to benefit in the future but not at present. You may wish to set up a Trust of such monies. This could be utilised in the future for the benefit of grandchildren to assist with the paying of school fees. This can be a good form of lifetime Inheritance Tax Planning if you survive the gift by seven years.
You may have life assurance policies or lump sum death benefits under a pension scheme. Have these benefits been assigned to a member of your family or will they be paid to your estate? By assigning lump sum payments to someone else rather than the funds being paid to your estate this may reduce any potential Inheritance Tax Liability on your death.
For further information and help on Financial Planning contact an experienced financial advisor such as ACS Financial Planning and for further information on Wills visit our section here.