Pensions are tax-efficient

you receive is also included in the calculation.

It’s always worth checking online pension tax calculators to work out the tax due on any withdrawals you plan to make. Try canadalife.co.uk/ tools/pension-tax-calculator.

What happens if I don’t manage to spend it all?

Lucky you. Pensions can be passed down the generations tax efficiently. If you’ve started accessing a pension using income drawdown, any remaining funds can be passed on to your beneficiaries.

If you have turned your pot into an annuity to generate a lifetime income, then it can be more complicated, as it depends on the choices you made at the start of the contract. That’s why it’s important when you make your choice on how to access your pension pot that you understand the impact later down the line – you don’t want to leave a spouse or dependents unable to manage.

With annuities you can choose for money to continue to be paid out to, say, your spouse, for a set period of time, or to ensure your family get the initial value of your annuity back less any payments you have received.

Make sure you know and understand all the options you have.

Final word

Andrew Tully: “Save as much as you can reasonably afford from as young an age as you can, invest sensibly, but if in any doubt get the help of a professional financial adviser who can help steer you onto the right path.” ■ Looking into the state of the nation’s finances reveals a bleak, and worrying, situation.

A shocking eight out of 10 people say they could not support themselves for more than three months if they lost their source of income. Meanwhile, one in three spends more than they earn each month, according to research by Topcashback.co.uk.

More than half of people say their financial wellbeing has affected their mental or physical health because not having enough money makes them feel trapped.

Seven out of 10 define financial wellness as being in control of their finances and having enough money to cover their monthly outgoings, while providing a reasonable standard of living.

■ Barclaycard has launched an online repayment calculator (barclaycard.co.uk/personal/ customer/repayment-calculator) that enables customers of any credit card provider to find out how long it will take to pay off their debt at their current level of repayment – and how much interest they will pay. The calculator then lets you play around with the figures and see how making a small increase in repayments can reduce the time it will take to be debt free, and lower the amount of interest.

■ Hundreds of thousands of homeowners are expected to struggle to clear interest-only mortgage deals that end in the next five years.

Research from Kensington Mortgages shows that by January 2024, approximately 250,000 interest-only borrowers will reach the end of their term and be unable to find a new loan. That’s 15% of the 1.7million homeowners who currently have interest-only mortgages.

Many will be nearing retirement, leaving little time to repay debt. But there are lots of new products launching for older borrowers, including lifetime interest-only deals, and people should seek advice on their options now rather than leaving it too late.

Big names including Nationwide, HSBC and the Bath, Leeds and Nottingham Building Societies are a few of those offering products into older age.