IT’S TIME FOR A MIDLIFE MONEY MOT

As the years roll by, your priorities change, and so should your financial planning. Not sure what to focus on? Here’s how to take action and get the balance right…

Get back on top of your finances in the new year

Bills, mortgages, work, supporting children and elderly parents, pensions… it’s no wonder our finances can feel under siege! Research from Aviva shows we feel most anxious about our financial futures between the ages of 45 and 55. With so much on our plates, it’s hard to know what to prioritise and where to put our energy. Everyone else comes first, right? Well, the start of the year is the perfect time to take stock and get a good grasp of any financial challenges that might be keeping you awake at night. Here’s how you can take action now…

ARE YOU FINANCIALLY RESILIENT?

Women are living longer than ever, typically to around 82 in the UK, though we have a 25% chance of reaching 96 and one in 10 will make it to 100! Good news, of course, but the challenge is: will you have enough income to live on? Will you have enough for a possible 20, or even 30, years after you stop work? While your mortgage may be paid off, it’s not just about affording the basics; you’ll want disposable income to spend on travel, leisure activities and treats. Lottery wins aside, you need to prepare for this.

ACTION PLAN

 Turn outgoings into savings. You want to balance your spending every month against what’s coming in. Give yourself the challenge to save as much as you can from those small regular outgoings; for example, check one utility supplier at a time to see if you could get a better deal elsewhere, or cancel anything you just don’t use. You should be saving a regular amount, as much as you can, at the start of each month. Set it up via a direct debit going into an account that has a good interest rate.

 Boost your investments. Have a good look at any savings and investments you have. If they’re not earning much interest, find somewhere better. Use comparison sites such as moneysupermarket.com or gocompare.com to check rates.

 Ask the experts. Consider talking to a financial planner who can review your current situation and help you plan for the future; find one at unbiased.co.uk or vouchedfor.co.uk. Expect to pay between £1,000 and £2,500 for a full financial plan. It’s not cheap, but it could end up saving you money in the long run.

WORRIED ABOUT YOUR PENSION?

Well, who isn’t! But don’t bury your head in the sand and ignore it. First, you need to work out how big your retirement pot currently is and what your annual income is likely to be as things stand, then find out how you can boost it.

ACTION PLAN

 Check your State Pension age and amount. Visit gov.uk/check-state-pension.  Ask your personal or work pension provider, or providers, for a statement.

You can track down pensions you paid in to during previous jobs by visiting gov.uk/find-pension-contact-details.

 Use a pension calculator to work out the income you’re likely to have in retirement. Find out how much you have first by visiting yourpension.gov.uk/ pension-calculator.  Pep up your pension pot. ‘If you’re employed, increase workplace contributions: that’s the best thing you can do to boost your retirement income,’ advises Royal London’s Steve Webb, former pensions minster.

 Talk to Pensionwise. If you’re over 55, and have received a letter from your pension provider telling you about the Pension Freedom rules, which give you access to your entire pension pot, visit pensionwise.gov.uk before you make any decisions. This is a free government advice service for the over-50s. Beware of scams eager to relieve you of your money. If it looks too good to be true, it probably is!

BIG CHANGES

Health issues, separation, divorce, death… no one really knows what’s around the corner or likes to think about these what-ifs. However, it can really help to do some forward planning around your finances to lessen any impact.

ACTION PLAN

 The most important step to take is making sure you have an up-to-date will.

The rules around inheritance are tricky and the only way to make sure your assets are distributed to your loved ones in the way you want is to make a will.

No one knows what’s around the corner. However, it can really help to do some forward planning around your finances

It’s vital to make sure you have a secure income in your own right

Without one, the courts could decide who will look after your children if they are under 18, and if you’re not married, your partner may not have a right to your assets. A will can also help ensure what you’re passing on to beneficiaries stays below the inheritance tax threshold of £325,000. Find a solicitor via The Law Society and expect to pay from £150 for a single will (solicitors.lawsociety.org.uk). ‘Don’t rely on your spouse or partner for future income,’ advises Steve. ‘Sadly, relationships do change and it’s vital to make sure you have a secure income in your own right.’ If you’re getting divorced, you may be entitled to a share of your partner’s pension. Speak to your legal adviser about including the value of your pensions when splitting assets.

 Set up a Lasting Power of Attorney

(LPA). This allows someone you trust to look after your money, should you become ill or incapacitated, although 70% of people in retirement don’t have one. ‘This can create real havoc if unexpected health issues crop up,’ warns Moira O’neill from Interactive Investor. You can do it at the same time as your will, but it will cost more. If you have elderly parents and they would like you to manage their finances if they’re unable to do so, ask them to arrange an LPA via the Office of the Public Guardian (gov.uk/power-ofattorney/make-lasting-power). If they no longer have the mental capacity to make decisions, you may have to apply to the Court of Protection (gov.uk/ courts-tribunals/court-of-protection).

 Consider life insurance. If you have dependents who rely on you to pay the mortgage, rent or other living expenses, look into life insurance, which will pay them a lump sum should the worst happen. Premiums start at around £5 a month. Compare quotes at confused. com or moneysupermarket.com. Don’t double up, though – ask your employer if they have given you life protection first. But keep in mind, if you leave your job you’ll lose the benefit.

ARE YOUR SAVINGS WORKING HARD ENOUGH?

As we get older, we can become more risk-averse with our money, but remember that investing can give potentially higher returns than leaving your money in a cash account. ‘If you’re thinking about investment, consider when you’ll need the money,’ says Sarah Coles of Hargreaves Lansdown. ‘If you have between five and 10 years to play with, or more, you have long enough to consider investing. It doesn’t matter if you’re 60, 70 or even 80: if you have a decent time horizon and you’re happy with the risk, you can invest.’

ACTION PLAN

 Keep some savings aside. Put some money in an easy-access cash account for life’s emergencies. Generally, a buffer of three months’ income is advised.

 Stocks and Shares ISA. If you haven’t used this year’s £20,000 tax allowance and have money you can put away, start with a Stocks and Shares ISA (gov.uk/individual-savings-accounts).

 Done that? Look online. Consider using online services like Moola (moo.la), Nutmeg (nutmeg.com) or Wealthify (wealthify.com). These will suggest funds to invest in based on your answers to questions about your attitude to risk.

IT’S A CONFIDENCE ISSUE

There are times when everything can seem overwhelming and it’s difficult to see the bigger picture or make important decisions. It’s vital to acknowledge these challenges, which are often fuelled by stress, the menopause or other health issues, and find a way of approaching things that feels manageable.

Corinne Sweet, a psychotherapist and author of Stop Fighting About Money, says, ‘I see a lot of women who talk themselves down, telling themselves they can’t do something, don’t know how to, or it’s too complicated. Try to catch yourself when you start with negative talk and build your self-esteem by joining an online forum or support group. When you feel more positive, you’ll be able to take a look at your finances, which may not be as scary as you think.’

ACTION PLAN

 Dedicate half an hour each week to go

through life admin. For example, sorting out bills, paperwork and online accounts will help you keep on top of things. Prioritise this and you’ll become more familiar with your spending patterns, making it easier to see ways to save.

 Talk to someone. Turning to your partner or a financially-savvy friend about financial sticking points can help you work out what you need to do.

 Look at your bank balance every day, if possible. It’s a simple thing, but it can really help you feel on top of things if you know how much money you have left for the month.

MORTGAGE FATIGUE

If you’re within 10 years of paying off your mortgage, you’re probably fantasising about what it will be like to be mortgage-free. One of the dilemmas of midlife is: ‘Should I pay off the mortgage sooner or put more money into my pension?’ There’s no easy answer, unfortunately, but the right one will depend on your own circumstances, so consult an independent financial adviser.

‘For many, repaying their mortgage is their top priority and they focus on this before considering investing or pensions,’ says Claire Walsh from Schroders Personal Wealth. ‘But because you get income tax relief on pension contributions, even a basic rate tax payer will automatically get a 20% increase in the money they pay into a pension. Don’t forget, you can access pensions from age 55 and take 25% of your pot tax-free, so this could be a strategy for repaying the mortgage.’

ACTION PLAN

 If you haven’t reviewed your mortgage in a while, speak to a mortgage adviser to make sure you’re on the best deal and that your mortgage still best suits your needs.

PULLED IN ALL DIRECTIONS?

More than half of those aged 55 or over are helping family members financially. The average sum parents give their children to help them buy their first homes is now more than £24,000! If you want to help your children get on the property ladder, pay university fees or stay on top of living costs, it’s important you work out what effect it will have on your future financial security. One in eight adults are also carers, 58% of them women. As well as being a physical and emotional drain, this may impact your finances or ability to work.

ACTION PLAN

 If you’re keen to help your children

buy their first homes, one way is to gift them the deposit, says Claire. ‘Most gifts to children are classed as Potentially Exempt Transfers, which means that there is no tax charge at the time of gifting and, provided you live on for seven years, there should not be any liability to inheritance tax on your death. You can gift as much as you like. ‘However, if you pass away within seven years, then the value of that gift is added back into your estate; if your estate value exceeds £325,000 it may be subject to inheritance tax,’ adds Claire.

 Supporting elderly parents? Consider asking your employer about flexible working. Anyone has the right to request this, as long as you’ve been with your workplace for at least 26 weeks. Find out more at gov.uk/flexible-working. If you’re a carer, visit Carers UK (carersuk.org). You might also be eligible for Carer’s Allowance. You can still get it if you are working, as long as it’s under the set limit.

If you have debt, talk to Stepchange for help with planning how to manage it (stepchange.org).