50 SHADES OF GREY MATTER
If you’ve clocked up your half century you’ve still got chance to make up for lost time and ensure you’re financially all set for retirement, says HARVEY JONES
What you do depends on your attitude to risk.. Financial Planner Nathan Valbonesi
TURNING 50 is a major landmark and one of the most important things you can do at this point is draw up a financial plan to determine how you expect to fund the rest of your life.
At this age, you’re old enough to understand the importance of saving for your retirement, but young enough to make up for lost time. To make sure you turn 80 in a good financial state, you need to make full use of your 50s.
Nathan Valbonesi, financial planner at Weatherbys Private Bank, says this is a good age to work out how much you need to save in your pot to maintain your current lifestyle.
He says: “You should also take time to manage your wealth in the most tax-efficient way.”
Running through Nathan’s top 10 essential checklist for over-50s should help you prepare for your retirement in advance.
1. Check state pension value
To find out whether you are on course to get the full basic state pension, or need to plug any gaps in your National Insurance contributions, request a state pension forecast using application form BR19 from the Gov.uk website.
2. Consolidate your pensions
If you have accumulated a range of personal and company pensions throughout your career, it can be easy to lose track of them.
So consider consolidating them into a single scheme. Nathan says: “By combining your pensions into a self-invested personal pension (SIPP), they should be easier to manage and you may save money on charges.”
3. Review your asset allocation
Younger investors can take more investment risks, as they have time to recover from a stock market crash. The over-50s tend to be more cautious, holding fewer shares as they age and more bonds, but Nathan says: “It’s not a one-sizefits-all option. What you do depends on your attitude to risk.
“As more of us leave our money invested after retiring rather than buying an annuity, we need to keep some exposure to the stock market to ensure our money keeps on growing.”
4. Check your pension limit
There is a limit on the total value of pension benefits you can build up throughout your lifetime, known as the lifetime allowance (LTA). Once you exceed £1,073,100, you could face a tax charge of up to 55%.
“That may look high but many doctors and other senior NHS staff may breach it,” says Nathan.
“The LTA has been frozen until 2026, so more could get caught.”
5. Tax-free cash question
From age 55, you can withdraw 25% of your pension free of tax. Taking that money in your 50s will reduce your income when you finally retire, so be sure to tread carefully.
“Taking cash and sticking it in a bank account may not be prudent given today’s low interest rates, plus it may count towards your estate for inheritance tax, while your pension does not,” Nathan says.
6. Write or update your will
Making a will can spare your family a major headache after you die.Without one, you risk depriving your spouse or partner of their home, increasing their inheritance tax burden, or leaving parts of your estate in the wrong hands.
7. Express your wishes
Completing or updating an “expression of wishes” form will ensure that all the death benefits on any of your pensions go to the right people when you die. “For those with finalsalary pensions, complete a ‘nomination of beneficiaries’ form instead,” Nathan says.
8. Plan for unexpected costs Once you retire, you will turn your
pension and other savings into a sustainable income, so plan ahead to make sure it lasts.
“Retirement spending often spikes in the early years, as people travel or pay for their children’s or grandchildren’s education,” says Nathan.
“In your final years, you have to make provision for higher healthcare costs.”
9. Give loved ones the power
As more people suffer from dementia and Alzheimer’s, it makes sense to plan for the worst by nominating a friend or relative to manage your affairs if you are no longer able to do so by drawing up a Lasting Power of Attorney.
“You should consider doing this while you are still fit and healthy, otherwise it may be too late,” Nathan says. “The LPA does not come into force until you are no longer able to manage your own affairs.”
10. The seven-year gifting rule
Making gifts to loved ones can cut any future inheritance tax liability, but remember the seven-year rule.
If the total value of your gifts is within the inheritance nil-rate band threshold of £325,000, they will not be taxable regardless of when you die.
Nathan says: “However, if you give away more than the nil-rate band and you die within seven years, anything above that threshold may be subject to 40% tax.”