Lowes Magazine Issue 130

RETIREMENT

New data for a comfortable retirement

Why women should better prepare for retirement Office for National Statistics data show that there are four times as many widows as widowers aged 80 and over – 1.1 million against 259,000. Women have typically built up smaller pension pots than men, which means that men enter retirement with far higher levels of income than women. So, where women are the surviving partner, often they have less income for the remainder of their lives than men. This highlights the importance for couples of making financial plans for later life. We find that in many households it is usual for one person to deal with the finances and to want to ensure the other is looked after and has the support of Lowes as and when the need may arise. Areas to look at are what benefits each couple may receive from their spouse’s/partner’s pension and what would happen to the survivor’s standard of living. This is because many expenses, such as house maintenance, insurance premiums and standing charges for utilities remain the same. Having the conversation and creating a plan, financial and practical, to cover eventualities and ensure the surviving spouse/partner is well provided for, can give peace of mind as well as make a real difference to the comfort and security of loved ones after death.

How much do we need a year for a comfortable retirement?

While this is a question which can only be answered based on individual circumstances and desires, for a number of years the Pensions and Lifetime Savings Association has published generic calculations of the annual amount needed for a minimum, moderate or comfortable retirement. The association has recently updated its figures, which unsurprisingly, given the cost of living increases over the past two years, have gone up. The figures are based on the rise in annual inflation, perceptions of what constitutes varying levels of retirement and the State Pension. They factor in housing, food, transport, holidays and leisure, clothing and personal items and helping others. The latest figures are shown in the table. They should be viewed as a general guideline. One of our key objectives for Lowes clients is to build our client’s wealth so that, as part of long term financial planning, you will have enough to give you the retirement you want and, importantly, you will not run out of money in retirement. As we all know, there are plenty of hurdles that can come along to make that a less than smooth path, including market fluctuations, different Government tax policies, as well as changes to individual circumstances. Something we see more of these days is the desire of retirees to want to help out younger family members who are struggling financially or need a boost to get on the housing ladder. It is important that retirement planning is taken over the long term and regularly reviewed. These days that applies as much to planning in retirement as it does before retirement. Latest PLSA figures for differing standards of retirement Single Income Joint Income Comfortable £43,100 £59,000 Moderate £31,300 £43,100 Minimum £14,400 £22,400 (Full State Pension calculated at £11,500 a year)

Paying into a spouse’s pension Lowes adviser Matt Henry says: Where a spouse is not earning, up to £2,880 a year can be contributed into their pension. With tax relief from the Government this takes the amount saved to £3,600 a year.

It makes sense for other reasons to build a couple’s joint pension wealth, as they then benefit from tax relief on each pension. Where a couple are over reliant on a single source of income, to enjoy the lifestyle they want they may have to take income that pushes the pension holder into a higher tax bracket. Drawing on two, well-funded pensions, money can be drawn from both pensions, making for a more tax-efficient and so longer lasting income stream.

Lowes.co.uk

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