Monthly Archives: August 2018

Countdown has commenced ….. Are you on track to a financially secure retirement future?

The very concept of retirement is changing and when you are at the point of retiring, the new ‘pension freedoms’ have opened up all sorts of alternative strategies to taking your pension benefits.

The way we can access our pension is now a lot more flexible and it’s no secret that in the UK we’re living longer than ever before.   With a longer retirement and more choice over how you can take your pension, planning ahead will help ensure you’re on track to a financially secure future.

Although retirement can still seem a while away, begin to consider what you want your life to be like when you get there.  Our timeline will help you get started.

Ten years before you plan to retire

Here are some things to think about as you start to build your plan:

· The age you’d like to retire
· How much you’ll likely have in your pension fund/s, and the income you’ll need when you retire
· Any savings, investments or other assets that you could add to your retirement income
· How your living expenses could change in the future
· How you’ll pay for any travel, hobbies or further education once you’ve retired
· An emergency savings fund, to help with any unexpected costs like car or home repairs
· Paying off any debts before you retire
· How you’ll support your dependants once you’ve retired
· Putting money aside to pay for long-term care for you, your partner or other dependants

Don’t forget that your spending habits are likely to change in retirement. For example, your commute costs are likely to be lower, but more time at home may mean your utility bills go up.

Five years before you plan to retire

Now is the time to make sure your goals are on track:

· Decide the age you’re likely to retire
· Consider phasing your retirement and continuing to work part-time for your current or a new employer
· Consider boosting your pension by increasing your contributions and/or adding lump sum payments (take advantage of any unused pension tax allowance)
· Trace any lost pensions through the Pension Tracing Service
· Ask for up-to-date statements for all your pensions. You can also get a forecast of your State Pension at www.gov.uk
· Look over your investments and savings to see if they still meet your attitude to risk as you get closer to retirement
· Think about whether you’d like to take an income from your pension or whether you want a pot of cash, including any tax-free allowance, to do something different in retirement
· Discuss your options with a professional financial adviser
· Write a Will or review your existing Will – and plan what will happen to your pension and estate if you die, plus any tax implications.

Six months to go

It’s time to give yourself a retirement readiness check-up:

· Review your pension statements to get an accurate picture of what your funds are worth
· Make an appointment with your professional financial adviser for advice on the best retirement options for you
· Determine the best option/s for taking your pension savings to meet your financial and lifestyle needs
· Tell your pension providers you’re planning to retire, so that they can send you any and all information you need in plenty of time
· Update your beneficiary information
· Set a date for a pre-retirement meeting with your employer
· Let the HM Revenue & Customs (HMRC) know you’re retiring because your change of status will affect your tax code
· Budget for changes in your day-to-day spending after you retire

Twelve to eight weeks before

It’s down to business now – you’re just outside of your selected retirement date:

· Speak with a professional financial adviser to consider your options and retirement plans
· Ask your provider about the ways you can access your pension based on the options available
· You should receive a letter four months before you reach State Pension Age, telling you how to claim your State Pension. If you haven’t received this by three months before, here’s how to claim this
· Look into any entitlements from the Government over and above any State Pension you may get, as these could make a real difference to your living costs

Eight to two weeks before

The final countdown! It’s time to make sure you have all the information you need to help make a decision:

· Consider any retirement quotes that your provider may have sent you
· Remember, if you want to use your pension to provide an income, you should shop around the different providers to get the best income you can. If you and/or your partner have a health and/or lifestyle condition, then you could get an even higher income as different providers also cover different conditions
· You’ll also need to apply to your provider/s if you’re moving pensions from different sources
· There you have it – happy retiring!

We can offer the right help

Whether you’re new to pensions, or whether your retirement is just a few years away and you want professional financial advice, we can offer the right help for you to make the most of your money now and in the future. To find out more about your options, please contact us.

 

Warning – The information noted above is for general information only and is not intended as personal advice.  Carpenter Rees does not accept any liability for your reliance upon, or any errors or omissions.

ISA rules and Inheritance Tax

Families set to pay millions in unnecessary tax

There’s a fundamental lack of awareness and understanding around Inheritance Tax, especially when it comes to how Individual Savings Accounts (ISAs) are treated after death. Given that some people have been able to amass over a million pounds in their ISAs, it’s an area where lack of knowledge could prove costly.

Over half (51%) of over-45s do not know that ISAs are liable for Inheritance Tax, leaving families across the UK set to pay millions in unnecessary taxes according to findings from an annual Inheritance Tax monitor survey[1].

Gifted to a partner 

As ISAs can only be gifted to a partner and not children without incurring tax, the Government will ultimately be a major beneficiary of money currently residing in Cash ISAs and Stocks & Shares ISAs. In the last Budget, HM Treasury predicted it would raise £5.3 billion in the 2017/18 tax year in Inheritance Tax, which will eventually increase to £6.5 billion by 2022 to 2023.

The research also revealed over three quarters (77%) think the UK’s Inheritance Tax rules are too complicated. Yet despite this, only a third (33%) have sought professional financial advice on Inheritance Tax planning. Of those who did seek advice, over two fifths (42%) spoke to a professional financial advise

Rules regarding inheritance

Some people could inherit less than they expected because they aren’t aware or make assumptions about the rules regarding inheritance. In particular, the rules governing the gifting of ISAs and valuable estates mean that many may be faced with a higher than expected Inheritance Tax bill.

ISAs remain the ‘go to’ financial product for many people as they look to build up a nest egg in a tax-efficient way during their lifetime. But with such a large number of older people investing into them, there is a worrying lack of awareness that ISAs are subject to a 40% Inheritance Tax charge. ISAs are a great tax-efficient investment in your lifetime, but more people need to be thinking about how to pass on their hard earned money to their loved ones when they die.  

Securing and protecting your wealth

Early preparation is the key to success here. Taking advantage of methods to secure and protect your wealth will ensure that more wealth can be passed onto the next generation – to find out more, please contact us.

Source data:

[1] Survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual Inheritance Tax threshold (nil-rate band) of £325,000. Carried out in October 2017. 

Article published by Goldmine Media Ltd.  For further information, please see our latest edition of Smart Money