Whilst it is easy to be naïve about the eventuality of old age, retirement is an inevitability for everyone.
If you wish to avoid paying high levels of tax and ensure your finances are correctly distributed among the members of your family retirement planning is a crucial step that should not be overlooked.
Even for those who understand the importance of pension planning, research has suggested that as many as 20% of couples over the age of 40 have never discussed their pensions with 49% have no idea about the level of retirement income they can expect once they stop working.
Why is it Important to Discuss Family Finances?
These figures are worrying, especially since families have become increasingly interdependent. Furthermore with the recent shake up to personal and state pensions (new pension freedoms were announced in 2014 and a new flat rate state pension will come into force this April) there is even more reason to discuss your plans for later life to ensure your partner and family receive the correct inheritance once you pass.
Despite these changes to pensions however, research also suggests that there is a reluctance for couples to visit a financial adviser to discuss retirement planning, with nearly two thirds having never met with one as a couple.
What Has Changed in Retirement Planning?
Traditionally retirement planning has focused on the needs of an individual, or a couple. However as families become increasingly interdependent, the situation has become more complicated as people need to factor in siblings, adult children or even parents into their financial plans.
Why Should You Discuss Your Will with Your Family?
One of the key areas that can cause confusion, or even disagreements following the death of a loved one is the Will. By speaking to a financial adviser to draw up a Will, and then discussing your intentions beforehand you will decrease the chance of upsetting arguments when it comes to distributing your estate after you are gone.
For those who have not set up a Will then it is time to stop putting it off. As many as 84% of 18-34 year olds and more surprisingly as many as 35% of over 55s are thought to not have a Will in the UK.
If you pass away without a Will you are considered to have died Intestate and specific rules apply. These rules changed on 1st October 2014 with the main beneficiary of these changes being your surviving spouse/civil partner.
Consider the Tax Implications of Inheritance
If you are planning to leave an inheritance to members of your family it is important to consider the most tax efficient way to do this to ensure that your loved ones do not lose much of your gift.
It can also be a good idea to consider the requirements of your children or younger generations. Attitudes to inheritance have changed in recent years with some younger relatives preferring their older family members fully enjoying retirement rather than struggling in order to leave something behind.
For those already at retirement, you may have already had the all-important family discussion and come to the conclusion that your family will not require as much in inheritance as you originally thought. This information could change your attitude to retirement, perhaps making you consider equity release or other retirement options.
Discuss Your Finances with Family and Advisers
It is understandable that you find the discussion of finances after your death a difficult subject to approach with your spouse, partner or family. However understanding the intentions of those around you is incredibly important.
Coupled with this you should seek professional financial advice from someone who can help you plan both your retirement and passing to ensure your money and assets are properly taken care of.
If you are wishing to speak to someone about pensions, retirement or financial planning please do not hesitate to contact Maxim Wealth Management today on 0141 764 0040 (Glasgow) or 0203 841 9941 (London). Alternatively you can fill in our Contact Form and one of our team will get back to you.