Farsight Financial Planning

Financial Blog
By Dominic Bowers, 22/09/2014
Blank lined pad and a sharpened yellow pencil
Blank lined pad and a sharpened yellow pencil
Three recently retired men were talking about what their grandchildren would be saying about them fifty years from now. 'I would like my grandchildren to say, 'He was successful in business’, declared the first man. 'Fifty years from now, 'said the second, 'I want them to say, 'He was a loyal family man'. Turning to the third, the first gent asked, 'So what do you want them to say about you in fifty years?' 'Me?' the third man replied. 'I want them all to say, 'He certainly looks good for his age!'

Whilst I’m not saying you’re going to live for 50 years after you retire, improvements in life expectancy has meant that for many of us the period after giving up work will be much longer than expected. Ensuring you plan carefully for ‘life’s longest holiday’ is now more important than ever. That’s why I thought I’d put together a retirement checklist to get you thinking about your retirement issues.

State Pension – The Government recently announced some major changes to how the State pension will operate from April 2016. Instead of receiving a complicated mix of basic state pension, graduated pension, SERPS and S2P, a single flat rate basic pension will be introduced. The new amount is projected to be £148.40 per week, although the exact amount is due to be announced later in 2015. The find out how this affects you and to see what you might receive in retirement you should request a State pension forecast - here.

Private Pensions – You should contact all of the companies who you hold pension policies with (including any final salary schemes) and request a projection of likely benefits at your intended retirement date. When added to your State pension amount this will give you an idea of your likely income in retirement. If you think you might have lost track of any of your pension schemes over the years you can track them down for free using The Pension Service website - here

Debt – It’s a good idea to go into retirement with as little debt as possible. Whilst you’re still in work and earning then you should try to pay off any outstanding mortgages, loans or credit cards, as with a fixed income it will be that much harder to pay them off. If you are struggling to pay all of your debt then it makes sense to prioritise and target the debt that is most expensive.

Savings and Investments – Funding your retirement isn’t just about your pensions. People very often will use savings and investments to supplement an income in retirement. You should start to think about where your money is currently held to ensure you get enough investment growth to replace the income you’re withdrawing. It’s also important to ensure you have the right investment products, i.e. ISA’s, bonds etc, in order to minimise the amount of tax you pay.

Budget – Moving from receiving a regular wage to receiving a pension can be a big change. You may have to get used to a significant drop in your disposable income. To make sure you don’t live beyond your means it’s very important that you add up all your outgoings and check you have enough income to cover them. Items to include are; rent/mortgage, council tax, utilities, telephone/broadband, car (insurance, servicing, loan repayments, fuel), television, food, clothing, entertainment, holidays. This may also be a good time to review these outgoings and see if you can shop around for a better deal. There are many online comparison sites that will help you do the number crunching and if you’ve not switched before it’s very likely you’ll save hundreds of pounds.

Health – If you’ve had any medical treatment in the past 10 years, if you’re a smoker, or if you take any regular medication, then it’s very likely you can receive an enhancement to the income you receive from your personal pensions. Ensure you disclose all of your medical history as industry sources say around 60% of people could qualify for an uplift in their income.

Get advice – There are many choices to be made in the run up to retirement and many of them will have a direct impact on how comfortable you’ll be. A recent change announced by the Government has provided retirees with much more choice, but also much more complexity. It is vital that you understand all of the pension options available to you in order to select the solution that’s most appropriate for your needs. An adviser can cut through the complexity, explain the pros and cons of each solution and help you to ensure your retirement is spent doing the things you want to do.