Majority Want Financial Advice to Deal with Retirement

upwardtrend200Recent research has shown that 86% of the population wants financial advice to help them prepare for their retirement, highlighting how many people do not feel confident in planning for this pivotal stage of their life.

The vast majority of people surveyed said that they want to ensure that they can financially support themselves during their retirement so that they do not become a burden to their loved ones.

However, due to a greater life expectancy, many clients are likely to experience a longer retirement than they had originally planned for.

This obviously means they will need access to more savings in order to support their lifestyle for a longer period, or reduce their expenditure during retirement.

One challenge which clients face is how to pass on their wealth without impacting on their own financial security during their retirement. Many people are actively looking for an adviser who has specialist knowledge on how to minimise the amount of Inheritance Tax (IHT) due on their estate and increase the amount they can leave for their loved ones.

Coupled with this, clients must plan for potential care costs which currently cost £29,000 per year on average, along with changes to tax or inflation which could dramatically affect how much they have to survive on during their retirement.

For many, retirement is a period of life to look forward to and enjoy after several decades of hard work.  However, these figures show how just many people feel overwhelmed with how to plan financially for this period of their life.

Tom Curran, Chief Executive of estate administration specialists Kings Court Trust, commented: “These figures highlight how the majority of the population is looking to plan for their retirement well in advance so that they do not become a financial burden to their loved ones.  Along with mitigating the impact of IHT and planning for care costs in later life, another element that clients need to consider is how their estate will be managed when they do pass away.

Estate administration can be a complex legal process, particularly for clients with a portfolio of assets and investments. Families will often turn to the financial adviser when dealing with the loss of a loved one, so a sound knowledge of the process is essential for an adviser to support their clients at this difficult time.”

We use sophisticated modelling to help our clients to see how their existing assets and financial planning can give them outcome they seek – or to show the expected shortfalls whilst there is still time to take action.

Your Residence And Inheritance Tax

BWhouseButton100The main residence nil rate band (RNRB) will be introduced on 6th April 2017 to apply to deaths on or after that date.

For those eligible to use it, it will be in addition to the standard nil rate band (NRB), currently £325,000 (and frozen at that level until April 2021).

In summary, the RNRB is intended to protect some or all of the value of the family home (or previous family home) from inheritance tax where the home (or, if the home has been disposed of, assets of equivalent value) is being passed on to children or grandchildren (or their spouses).

The RNRB will be phased in gradually from 2017/18 to 2020/2021 as follows:

  • £100,000 per person in 2017/18
  • £125,000 per person in 2018/19
  • £150,000 per person in 2019/20
  • £175,000 per person in 2020/21
  • and then increasing in line with CPI in subsequent years

The RNRB can be offset against the value of a property which has, at some time, been occupied as the family home as long as that home passes on death to the direct descendants of the deceased.

A direct descendant is defined as a child (including step-child, adopted child or foster child) or grandchild of the deceased. This includes the situation where the property is left to a direct descendant and their spouse or civil partner jointly, to a direct descendant’s spouse or civil partner solely, or to a direct descendant’s widow, widower or surviving civil partner who has not remarried or entered into another civil partnership at the time of death of the deceased.

The RNRB will be available when the individual dies on or after 6th April 2017. The transfer must be on death and can be made by will, under intestacy or as a result of the rule of survivorship.

An estate will be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal of the property as an addition to the RNRB that can be used on death. In the Government Technical Note this is referred to as the ‘additional RNRB’. The qualifying conditions for the additional RNRB would be broadly the same as those for the RNRB.

Clearly there is a lot more to it than this so do take professional advice and not rely upon a limited knowledge of the rules. And ensure that you will including your living will, are up to date ~
oliff.info/your-financial-journey