A pension can form just one of the key issues a person will need to consider in their retirement. And as many plan ahead, individuals may need to take action ahead of time. Weatherbys Private Bank has compiled a checklist for over 50s to help them understand what to do.
The fourth step Britons are urged to take is considering one’s pension limit under the Lifetime Allowance – which currently stands at £1,073,000.
Going over this limit means a hefty tax charge of 55 percent which many will be keen to avoid.
While the current allowance seems high, it may be easy to breach, firstly due to the recent Government freeze, and secondly due to compound interest.
In a similar vein, the tax-free element of pensions may present a difficult decision for Britons embarking upon this checklist.
Although pension freedoms rules allow withdrawals of 25 percent once someone reaches 55, it may not be necessary to take this cash out at this point – a decision Britons will need to make themselves.
And given low interest rates at present, it may be worth leaving one’s pension alone.
The sixth and seventh considerations on the retirement checklist are to do with life for family and friends when one is no longer around.
Ensuring one has a Will in place which is up-to-date helps an estate to be split as an individual intended, while filling out an expression of wishes form can also ensure the correct people receive the right amount.
Towards later life, it may also be necessary for a Power of Attorney to make decisions for an individual in the event of illness, for example.
Undertaking this kind of legal arrangement as early as possible ensures everything is in place should this happen, and things are not left too late.
In this sense, the ninth item on the checklist involves Inheritance Tax – a levy paid on a person’s estate above a certain threshold – currently at 40 percent.
Gifting out of an estate can be a good and suitable way to legally reduce the amount of tax which is payable upon death.
However, if a person gives away more than the nil rate band – usually £325,000 – and dies within seven years, what is left in the estate over the nil rate band will be subject to IHT.
Finally, then, while a person is still around to enjoy their later years of life, planning for unexpected costs is the last item on a checklist towards a successful retirement.
Spending can fluctuate and thus having a rough idea of outgoings and income will be key.
In later years, healthcare costs, for example, may rise, and these should also be accounted for.
Nathan Valbonesi, financial planner at Weatherbys Private Bank, commented on the matter.
He said: “Getting a head start with your financial plans in your 50s will give you greater visibility on how your retirement will pan out.
“You will know how much you need to maintain your current lifestyle.
“It will also enable you to make the most of rules to ensure you are managing your wealth in the most tax-efficient way.”
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