'Every penny counts!' Britons urged to take action now on managing money in later life

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When it comes to retirement, not only do individuals need to ask themselves how much they can afford to spend on a day to day basis, but also how and when to take money from their savings going forward – without the safety net of a regular salary or wages. Britons are also likely to need to predict how much they are set to need later into their retirement, looking at each year for what could end up being the next 30 years, or even more. Bearing this in mind, Express.co.uk spoke exclusively to Ben Hampton, Retirement Advice Specialist at abrdn, who offered further insight into retirement, by providing the top tips to help Britons manage their later life finances. 

The first important step to consider when planning and managing money in retirement is creating a plan ahead of time, to ensure an individual has an idea of how their retirement is set to map out.

Mr Hampton explained: “Retirement is a marathon, not a sprint, so make sure you have an income plan that reflects that. While celebrating and treating yourself in your early days of retirement is well deserved, it’s important that you think ahead and create a plan as to how you’re going to make sure your money lasts for the duration of your retirement.

“There are a number of online calculators that can give an estimate of what your retirement income could look like. However, it’s worth remembering, for most people there isn’t a flat level of income needed throughout retirement, so you need to factor the ups and downs into your planning.

“People often spend more in the early years of retirement when they are fit and healthy and see their income needs may flatten out over time. But retirement costs often rise again in later life, driven by factors such as care needs or assisted living.”

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retirement planning money saving

Retirement: Britons urged to take action now to manage money in later life (Image: Getty)

But an equally important point is monitoring one’s money in retirement. As life expectancy increases, Britons are set to spend more of their adult lives in retirement than ever before. However, this may come with additional challenges when it comes to finances, which are important to consider. 

Mr Hampton added: “As time goes on, your priorities and spending habits may change,  maybe your investments perform differently than expected, or you face a sudden and unexpected cost, so it makes sense to re-evaluate your retirement savings on a regular basis to ensure you have enough. 

“Certain events like the current global pandemic might have negatively impacted your finances (even in the short term) so you need to work out how you are going to navigate these setbacks. Of course, on the flipside, it might be some of these challenges mean you are spending less than planned and therefore you might be able to afford things in the future you hadn’t considered an option.”

While spending is one of the key items on the retirement checklist to consider, so is saving, allowing Britons to ensure they have enough to cover expenses in later life, whether these are planned or not. Spending and saving considerations, then, appear to work hand in hand. 

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Mr Hampton continued: “Retirement is not the end of the road for investing your money for the future. Far from it. It’s really important to still do what you can to make sure your savings are working as hard as possible.

“Try not to take from your pension pot for the sake of it. Money in your pension is usually still being actively invested and it is going to have a better chance of growing if it remains invested, rather than sitting in your current account waiting to be spent.

“If you have any extra savings that aren’t in your pension pot, it might be worth investing these in something like a Stocks and Shares ISA, especially if you aren’t reliant on them and need them to be instantly accessible. Particularly in the current low-interest rate and higher inflation environment – your savings could be losing value by the day if you leave them untouched.

“If you do choose to invest separately to your pension, make sure the level of risk is right for you. Higher risk investments may have the potential to achieve higher returns if you time it right, but if you only plan to invest for a short period of time then it might not be worth taking any major risks. A financial adviser will be able to discuss all of this with you, including your attitude to risk.”

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Retirement: How to become a pension ‘millionaire’ (Image: EXPRESS•Vanguard)

However, another equally important point is ensuring one is tax-efficient. This is vital, as Mr Hampton says “every penny counts” when managing money, particularly when it comes to the tax savings a person may be able to make.

Taxes can, of course, vary from every pension or savings pot a person may hold, and having an understanding of how each one works is likely to be the most useful and efficient approach an individual can take.

Mr Hampton has advised individuals to “be smart” with how and when they take withdrawals, and of course, the amount they withdraw each year. This is because this could have a significant impact on the tax bracket a person actually falls into.

For example, under current rules, a quarter of a person’s pension pot can usually be taken tax-free. Individuals will need to, however, pay Income Tax on the rest which remains. As a result, then, people could choose to take this as a lump sum, or to take smaller regular amounts, depending on what suits them best.

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Of course, if individuals are not certain about what the best course of action for them, and indeed their family, is, then speaking to a financial adviser could significantly ease this process and get Britons on track to the kind of retirement they desire.

These experts can often provide people with a tailored plan which is designed to meet a person’s individual needs, something which Mr Hampton highlighted is important on both a “financial and emotional” front. Abrdn currently offers a Retirement Advice solution to help people make the most of their money in this way.

Other individuals may also be thinking about either gifting money to family, friends or a charity, either for Inheritance Tax purposes, or simply due to their own personal desires. With this kind of estate planning, people can always benefit from speaking to a financial adviser to avoid complications ensuing. 

There are also Government-backed services which can help individuals who are dealing with their finances, or planning towards later life. Pension Wise helps Britons to manage their pension income and understand their goals for retirement. While Money Helper can assist people more generally with financial-related queries. 

Harry Byrne

Harry Byrne

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