Hold on to what you've got

Pensions, property, insurance, good financial sense - by the time you're in your fifties you should have it all. So what's the best way to manage your assets? And how can you hedge against a lean old age?

Maturity: it's good to be young, but getting older has its benefits. Not least of these is that many people find themselves in a healthier financial situation. If the children have moved away, then the bills get smaller. Many people will themselves inherit money from parents and other relatives. And there are a range of financial products, especially insurance, which are cheaper for the over-fifties. But it is a time to be assertive in taking decisions and to make sure that you are getting the best possible financial deals.

Maturity: it's good to be young, but getting older has its benefits. Not least of these is that many people find themselves in a healthier financial situation. If the children have moved away, then the bills get smaller. Many people will themselves inherit money from parents and other relatives. And there are a range of financial products, especially insurance, which are cheaper for the over-fifties. But it is a time to be assertive in taking decisions and to make sure that you are getting the best possible financial deals.

"The first priority is to look at the type of pension you have," says Rhian Beynon from Age Concern. "This is a key time if someone is in work and they should ask themselves if they have enough in their pension to have the lifestyle in retirement they want. This is their last opportunity."

Donna Bradshaw, a director of independent financial advisers Fiona Price and Partners, adds: "It's a time to take stock and review your finances. Write down what you want to achieve and then build a plan to get to that point. Company pension schemes often pay less than people expect and often don't include benefits in kind, so you should check what you are entitled to and how your pension scheme is doing.

"If someone is a higher-rate taxpayer and will be on the basic rate after retirement then putting more into a pension is tax efficient. Those on lower incomes will have more difficulty. They may have no inheritances and they have less to build up reasonable savings with. If you have now paid off your mortgage and are still working then divert that money into some form of savings or investment: use it to build your finances for retirement."

Underlining the need to invest in pensions, the permitted limit for investment in personal pension plans for the self-employed and company directors rises to 30 per cent of salary at 50, 35 per cent at 56 and 40 per cent from 61 until 74. The 15 per cent of salary limit for additional voluntary contributions to employers' pension schemes does not increase with age.

Ms Bradshaw emphasises the impact decisions taken now have on income for the rest of a person's life. "The sums involved are far higher than they would be for someone in their twenties or thirties, so it is worth taking professional advice," she says. Even though she has a vested interest, it is difficult to disagree with her.

If the pension may be the most valuable investment held by a person in their fifties, the next most valuable is likely to be their home. Decisions here need to be taken, too, as it may be possible to trade down into a smaller home releasing capital for an alternative investment. But would this be sensible? Probably not, say the advisers.

Ray Boulger, senior technical manager mortgages with John Charcol Brokers, has recently been considering this option and rejected it. "I am 55 and my children are gone, apart from one at the moment, but we can't really trade down to a smaller property as we have our children and grandchildren come to see us a lot. Those parents with more than one child will probably want to keep their house as it is." What is more, suggests Mr Boulger, there is a good chance that property price appreciation will outperform the stock market. This is particularly true, he points out, because most people will not be buying shares with borrowed money, whereas a mortgage lender's loan is used to finance capital gains. Consequently, it may actually be worth trading up rather than down, using a short-term mortgage to finance an acquisition, or to finance a second home as a buy-to-let investment.

Despite the problems with negative equity, home prices have grown steadily in recent years. (See chart on this page.) While average prices fell in the early Nineties - falling by 5.6 per cent in 1992 - this was exceptional and followed price growth of over 20 per cent in 1988 and 1989.

Malcolm Harrison, spokesman for the Association of Residential Letting Agents (ARLA), strongly advises people with sufficient spare capital to put some into a buy-to-let. "Typically a buy-to-let investor is in their forties or fifties - people who don't like the stock exchange, who prior to buy-to-let had tended to leave spare cash in a building society account," he says. "They can understand buy-to-let, it is controllable and it is a medium to long term investment." One of the great benefits is a good income stream while building up the capital asset. Rental incomes usually rise in line with price inflation rather than average earnings, and in years when rent rises are small the capital appreciation tends to rise more because of the character of the housing market.

Properties which offer the highest revenues as a proportion of purchase prices may offer lower capital growth. One study showed that former council homes produced good rents for low purchase prices, but they may be difficult to resell. There may also be higher maintenance costs involved.

While ARLA may be pushing the buy-to-let market to promote the interests of its members, it is not necessary to use a letting agent even if buying a property through a mortgage. Mr Boulger points out more mortgage lenders are offering buy-to-let mortgages on increasingly competitive terms. While in the past it was common for lenders to require the use of a managing agent, many now allow the borrower to manage the property themselves. (Managing agents' fees are typically 10 to 15 per cent of income, plus an initial arranging fee of £100 or more.) If a home owner decides to let their existing home, buying a second for themselves, there are tax benefits from extending the mortgage term on the first home, rather than paying off the mortgage. This enables mortgage costs to be counted against rental income for tax purposes.

While considering how to strengthen investments, opportunities to reduce overheads should not be overlooked. Most insurance costs should fall once the insured passes 50. Although there are no absolute rules, AA Insurance says premiums for the over 50s will typically fall by around 20 to 25 per cent on cars - as a discount which is often called a "maturity bonus" - on homes by 10 per cent and on caravans by 10 per cent. Travel insurance, though, may rise along with the risk - but even here increases can be avoided by shopping around for a good deal, though insurers may require a letter from a GP confirming good health. There are several financial services providers specialising in meeting the needs of over fifties. These include divisions of charities Age Concern and Help the Aged, and Saga Insurance. Products offered typically include home, motor, caravan, travel and pet insurance, plus life assurance and savings accounts. But, it is still important to compare rates - Saga's savings account offers 5.47 per cent, which does not match the best accounts available.

With age also comes additional anxiety. There may be concerns over the risk of redundancy for the over fifties. While there are insurance products that offer protection against unemployment, these tend to be expensive and it is important to check the exact nature of the cover. A product which may become almost inescapable is long-term care insurance, which is cheaper if it is paid for prior to retirement. The Government's review of the funding of long-term care is not yet complete, but it is clear those who need nursing and residential care, and their families, will increasingly be expected to pay for it.

Companies offering long-term care insurance products include some of the largest insurers, including Zurich, Norwich Union, PPP, Scottish Widows, Scottish Provident, Scottish Amicable and Skandia. The number of policies in place is steadily growing, with 5,000 policies issued last year taking the total number of people insured to over 33,000.

Age Concern offers policies underwritten by CGU. Peter Gatenby, director of Age Concern Financial Partnerships, says the policies support the work of the charity. "CGU is the insurer behind it, but we are not just branding their product - we are the designers of the product," he says. "We work with the insurance company and we say to them this is what we want the product to look like and this is what we want it to do. You can buy into it while still relatively healthy. When the insured fails a certain number of functions they can go into a home."

The cost of taking out a policy ranges widely (see chart on this page), as the cover can vary substantially. The insured, for instance, may specify the home they wish to pay for. Policies are typically used to top-up savings rather than pay in total for care, so premiums also reflect the extent of the insured's savings. Premium costs also rise as a person gets older.

"This is quite an involved sale," says Mr Gatenby. "We are only selling it at the moment through IFAs. People need comprehensive advice."

Advice is perhaps the watchword for people nearing the end of their working lives. Those treading unwisely may have many years of regret ahead of them - as those mis-sold pensions in the past will testify. But those well counselled can look forward to decades to come of happiness and plenty.