PLAN TO AVOID RETIREMENT PAIN

Engage at the pre-retirement phase

Create a plan

The pandemic has had a significant impact on how over-55s spend money

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THE good news is borrowing by the over-55s is expected to fall next year from £226billion in 2019 to £207bn as their appetite to take on credit sinks due to financial uncertainty around coronavirus.

But research from More2Life also shows that as consumer confidence returns and the full impact on finances of the crisis is felt, borrowing among the over55s is expected to increase to £300bn by 2030.

This makes it vital that over-50s do some financial planning to ensure they don’t end up struggling when they hit retirement.

Dave Harris, chief executive at lender More2Life, said: “The coronavirus pandemic has had a significant impact on the way over-55s spend their money.

“The ongoing restrictions and uncertain economic backdrop have caused many to become more cautious with their spending, particularly when it comes to large big-ticket items such as cars and holidays.

“As a consequence there has been less need for over-55s to borrow. However, while this may be the case short term, this trend will reverse itself as the wider impact of the crisis is felt.

“Thousands of retirees have experienced a loss of income since the start of the pandemic, either as a result of their pension pot falling in value, being furloughed or losing their job. As they navigate the economic fallout of the pandemic and look to draw on extra funds for financial support, it is estimated that borrowing levels among this demographic will rise.”

We’ve teamed up with Dave for his three steps to improving your retirement finances...

Unlike their parents, younger generations now generally understand that they will need to look beyond their state and workplace pensions to support them during their later years.

The first step is to really understand that you need to make some choices and start to actively plan out what your finances might look like.

Doing nothing is not an option. Some people may have needed to dip into savings during the crisis and so it’s critical if you are one of them to consider the most taxefficient savings options in order to make up this shortfall and boost your pension pot.

ISAs are one worthwhile option, specifically the Lifetime ISA if you are aged between 18 and 40 – where you get an additional 25% boost to savings at no extra cost with the government bonus.

A stocks and shares ISA could be an alternative if you are not able to access a LISA – although these can go down as well as up.

Whether you have been severely impacted by the pandemic or not, anyone feeling unsure about their later life prospects should create a long-term financial plan.

One key thing to remember when doing this is that a good plan is flexible and draws on all potential assets during retirement – state pension, workplace pensions, benefit entitlements, savings and investments, and housing wealth.

Research from More2Life found almost two in five retirees aged over 54 said their monthly expenditure exceeds their household’s income – either occasionally or on a regular basis.

To avoid this if you are approaching retirement you should consider how all of your current savings and assets can help you live comfortably.

More often than not a home is your single biggest asset and releasing some of the equity tied up in it can boost finances.

The pension freedoms have put us all in control of our own retirement planning, deciding how and when we will access any savings we have. But this also means a significant responsibility to make the right decisions to achieve the retirement we want.

This responsibility has been made even greater as those approaching retirement now need to consider the impact the pandemic may have had on their finances.

One of the best ways to create an effective plan is to seek advice from an independent financial adviser. These professionals will not only help you understand the full range of financial options available but make specific recommendations about the ones that will best suit your circumstances, ensuring your retirement provisions are tailor-made and make the best use of your savings and assets.

It costs to have a session with an IFA but it could be money well spent because it could help save you cash by ensuring you access savings tax efficiently.

Plus, it will help to protect you from crooks who are out in force trying to get their hands on your hard-earned cash.

You can find an IFA in your local area via vouchedfor. co. uk and unbiased.co.uk.