Planning considerations never end, in the earlier years, life is all about saving money, and ensuring adequate protection, but later life planning also has more than its fair share of financial planning considerations.
To name a few of the main topics that come into sharp focus later in life, there is: how to make the most of the pension funds one has amassed; long term care considerations, as the cost of long term care can be a very sobering thought; and also Estate planning, ensuring as much as possible of your Estate goes to those whom it is intended.
The traditional perception of what retirement looks like for many has gone through some major shifts over the years. Long gone are the days when a person worked for the same employer their whole life and retired all at once on probably a final salary pension, or a defined contribution pension or two, whose funds they might then have annuitised at previously far more attractive rates.
Many now want flexibility, perhaps scaling back their work, or committing to a new career on reduced hours to suit them, and continuing work for many years longer, supplemented by other sources: State pension, as well as savings, pension, rental and investment income, perhaps.
People are also living a lot longer, their money has to stretch a lot farther than it might have had to several decades ago.
When George Osbourne delivered his budget speech in 2015, he announced that nobody need have to buy an annuity. We now have the option to be able to draw upon our defined contribution pension income very flexibly, and this suits people who are choosing to work longer but less regularly. The undrawn funds can remain invested within the pension, benefiting from the tax efficiencies that a pension provides, no income tax or capital gains tax is due whilst the funds remain within the pension wrapper. Annuities do continue to have their place, but they are not right for all, indeed rates are in large part very poor value for money at present. Conversely, flexible access might not suit everyone either.
Aside from the more obvious benefits of flexibility in pension planning, retirement planning at this later stage in life also has many synergies with long term care planning, and indeed with Estate planning. The earlier a person can commit seriously to saving for retirement, the better equipped they will enable themselves to be for each of these later life scenarios.
Finally, there are myriad solutions to all of the above topics a person might face in their latter years, each solution having its pros and its cons, and some solutions being more appropriate for some rather than others. The best guidance I can give generally, is to speak to a professional, a Wealth Planner and/ or a Solicitor, who can help break down what is most suitable for you based on your own individual circumstances. The earlier in life one can begin to devise a plan for those later years, the better equipped you will be for later in life, should any of these topics be relevant.
Clare Julian, Wealth Planner
The information provided in this article is of a general nature. It is not a substitute for specific advice with regard to your own circumstances.