Managing your finances
Having well organised finances is one of the cornerstones of a happy and fulfilling life at any age. At this point in your life, it may be even more important. On one hand, your senior years can empower you to make positive changes to the way you live—such as scaling down the number of hours you work or quitting the day job entirely—with the goal of spending more time with family and friends, travelling to see more of the world and rediscovering your favourite hobbies.
On the other, you are likely to encounter some extra expenses that may range from making adjustments to your home as a result of reduced mobility to funding long-term social care. Whatever your circumstances, it will be much easier to face them with a full understanding of your financial situation and the options that are available to you.
This section explores the biggest decisions you have to make to manage your money effectively. It also looks at the different sources of financial support in the form of benefits and services that you may be able to access either now or when you reach a certain age.
Wills, trusts and legacies
Making your final wishes clear in a will gives you peace of mind that your financial assets will be redistributed in line with your preferences after your passing. Contrary to many people’s assumptions, if you do not make a will, your possessions do not automatically go to your family, and significant sums of money can be claimed by the government through inheritance tax.
In a will, you have the chance to set out precisely how your estate is distributed. You can decide how much family members, friends and charities receive, make specific gifts and put a tax plan in place. As well as allowing you to arrange your finances in the event of your death, wills enable you to make plans for your funeral, state who should be in charge of your estate and specify who should assume legal guardianship of any dependent children, should anything happen to you.
One way of ensuring that your money goes where you want it to is by putting it into a trust. A trust is a fund containing an amount of money left to an identified beneficiary or group of beneficiaries. You might opt to create a trust to: prevent a family member from inheriting assets when they are too young; protect a vulnerable relative who may be unduly influenced by others; and ensure someone against the risk of bankruptcy. Trusts also help to reduce inheritance tax by removing assets from your taxable estate.
It is important to make sure your will is written in accordance with the appropriate legal standards and that you receive suitable advice on the administration of your estate. To help you find a reputable solicitor, the Law Society has established the Wills and Inheritance Quality Scheme which provides a mark of best practice to professionals who sign up. Providers participating in the scheme are governed by a set of procedures for ensuring that they act transparently and address common risks, errors and inconsistencies that can undermine their advice.
Another way to ensure you receive the best form of help in drafting your will is to use Certainty's National Will Register website. Endorsed by the Law Society and leading UK law firms and charities, the website helps you find a will writing professional in your local area by using your postcode to search its database. It also allows you to register and electronically store your will online so it can be easily found when you are gone.
If you wish to leave some of your assets to charity, Remember A Charity can help you decide which organisation should receive your gift. Remember A Charity is affiliated with more than 140 third sector organisations and was founded to encourage people to consider making donations in their wills. In addition to helping you find a charity that suits your interests, its website can also be used to locate a professional advisor.
Pensions are your main source of income when you retire. There are three main types of pensions: state, personal and workplace. To be comfortable in retirement, you may need to have a combination of different pensions to achieve a decent standard of living.
Most people have access to a state pension. The government has recently introduced a new single tier state pension scheme. The reforms mean that you may receive a different amount depending on when you were born. You should check the GOV.UK page on The new State Pension for specific details.
Personal and workplace pension schemes work differently depending on whether you have a defined benefit or defined contribution pension. Defined benefit schemes give you a predetermined income when you retire, whereas contributory pensions allow you to build up your pension fund over time. Every private pension is also governed by its own set of rules which can influence how much income you can get when you finally begin to draw on your savings.
The subject of pensions can seem daunting. GOV.UK has recently set up Pension Wise which is a free service that offers free face-to-face or over the phone consultations to help you understand your pension options. There is also the Pensions page from Citizens Advice, the charity that runs Pension Wise.
The Pensions Advisory Service is an independent organisation that provides free and impartial guidance about pensions. You can browse the service’s comprehensive online resources for information on all aspects of the pensions system or contact its advisors directly for tailored assistance.
It is likely that you require increasing amounts of support with everyday tasks as you get older. Whether provided in your own home or in a residential setting, personal care can become a major expense. Based on information from Health and Social Care Information Centre's report, Personal Social Services: Expenditure and Unit Costs, England, 2013-14, the average cost of home care was £193 per person per week in 2013/14 while the equivalent figure for residential care was as much as £538.
In many cases, you can receive financial assistance from either the NHS or your local council who may fund some or all of your care depending on your circumstances. If you have a disability or complex medical problem, you might be entitled to free care under NHS continuing healthcare.
You might be eligible for funding from your local authority. The money will usually be provided by your adult social services department or your local Health and Social Care Trust if you live in Northern Ireland. They will carry out an assessment to see if you meet the criteria for funding. Whether you are given funding and exactly how much you receive will depend on your individual needs and financial situation.
Funding arrangements for care vary depending on which part of the UK you live. Citizens Advice’s website offers clear information on the social care systems of England, Wales, Scotland and Northern Ireland. You can also visit our pages on Homecare services, Independent living and supported accommodation and Residential care homes for more details on funding.
Should you find that you are not entitled to any government backed financing for your care needs, there are a number of options you might want to consider. These include securing a care fee payment plan, downsizing your home to free up assets, deferred payments to your local council and equity release schemes. The Money Advice Service website offers detailed guidance on these and other ways of funding your own care. Additionally, the Community Support and Social Work team at Jewish Care Direct offers practical support, advice and advocacy services throughout the UK. Call 020 8922 2222 or send an email to the firstname.lastname@example.org to get in touch with a professional who can help.
When you reach retirement, you become eligible for all sorts of entitlements and public concessions that are designed to protect your finances and boost your quality of life. Some of these benefits do not kick in automatically, and you will sometimes need to ask or apply to the appropriate public authority to receive them. This is why it's important for you to know about the things you might be entitled to in the first place.
Pension Credit is a means-tested benefit that increases the amount you receive in your state pension. You can qualify for Pension Credit at the same time as you start receiving the state pension. It comprises of two elements. Guaranteed Credit tops up your weekly income if it’s below a certain level. The second element, Savings Credit, is an extra payment for people who have saved up for their retirement. Due to changes in the law, this component is being phased out.
The Winter Fuel Payment is also available to people who were born on or before 5th January 1953. It is designed to help you pay your heating bills by providing a tax-free payment of between £100 and £300 over the winter period. If you receive a state pension or another social security benefit, you will automatically receive the payment.
The NHS offers older people concessions across many services that younger people would usually be required to make a contribution towards. Depending on your circumstances, you might be entitled to free dental care, prescriptions, eye tests, wigs and fabric supports. You may also be able to claim contributions towards the cost of travel to hospital and vouchers to help you pay for glasses or contact lenses. These Health benefits are explained in greater detail on the Age UK site.
You can apply for an older person’s bus pass for free travel when you reach a certain age (depending on where you live). In England, you become eligible for a bus pass when you reach the female state pension age, regardless of whether you are a man or a woman. However, if you live in London, Wales, Scotland or Northern Ireland, you can claim a bus pass when you reach 60.
At the age of 75, you become entitled to Get a free or discounted TV licence which covers everyone living at your address. If you are blind or in residential care, you can apply for a discount on your television licence at any age.
Finally, the government gives out a tax-free Christmas Bonus of £10 to people getting certain benefits such as the state pension. This is a one off payment that is usually made in early December.