Older, wiser, fifty and free

The third in a series on financial planning through the stages of life

POLICEMEN looking younger is one thing. Cliff Richard turning 55 this month is, for many erstwhile Teds and Rockers, an altogether more serious sign of how quickly time is passing.

But being in your fifties need not be a trigger for nostalgic regret. Indeed, for many it is a time of financial and social freedom, as children become more independent. It is also a time when retiring starts to become a definite forthcoming event, rather than a remote future possibility.

The key to maximising this relative financial freedom is planning. Whatever your personal circumstances, the main financial points to consider are:

q Eliminate short-term debts. If you have any spare savings, pay off any outstanding overdraft or credit or store card debt - you are almost certainly paying a lot more to borrow than the return from your savings.

q Review your mortgage. The fact that you may be aiming to repay your mortgage within a decade or so does not mean you cannot cash in on the crop of cheap fixed-rate and discounted deals. In fact, as Ian Darby of John Charcol, the independent adviser, says, many in their fifties are ideally placed to benefit from this competition because some of the best deals are reserved for people who are borrowing less than 75 per cent of the value of their homes. Do check that the savings on the deal will cover the costs of switching to a lender within a year or so, and watch out for hefty redemption penalties.

q Check your pension provision. Retirement planning should be moved to the top of your agenda. As a first step find out what you are in line to get - from the state (ask the DSS what your projected basic state pension and Serps entitlements are), your current and any previous employers (check the projected benefits statements), and any private plans. It is useful if your partner does the same, as it is your joint income that will be critical in determining how much money you have in retirement.

q If you can, top up your pension. Pensions are a highly tax-efficient form of saving - you get tax relief on your contributions and the investment fund itself grows tax-free. If you have got spare cash, whether it is a lump sum or money you can afford to save each month, it is usually worth topping up your pension. If you are in a company scheme, you get tax breaks on pension contributions (including your and your employer's contributions) of up to 15 per cent of your earnings. You can either take out an additional voluntary contributions (AVC) plan from your employer, or a free-standing AVC (FSAVC) plan from an insurer. The latter tend to be more expensive, but offer greater flexibility if you switch jobs. If you have got a personal pension plan, the simplest option is to increase your contributions. The Inland Revenue sets limits on the maximum you may contribute which, as with so many tax rules, are not famed for their simplicity - the annual ceiling for people in their fifties varies from 20 to 35 per cent of net earnings.

q Review your savings and investments. Check whether your current mix of investments suits your needs. Are you happy with the mix between safe, immediate-income products like savings accounts and riskier, medium-term growth products, such as unit and investment trusts? Many people's natural inclination is to lean towards the safe haven of their building society, and it is a good idea to keep at least an emergency fund there, ready for instant access. But equity-based investments, like unit trusts, have historically produced much better returns than savings accounts. If you are choosing unit or investment trusts, look for funds with good performance records, investing in areas with which you feel comfortable.

q Use the tax breaks on offer. Once you have decided on your investments, exploit the available tax breaks that fit those investments. The main tax shelter is the Tax Exempt Special Saving Account, or Tessa (essentially a five-year savings account offering tax-free interest on savings of up to pounds 9,000 in total) and a personal equity plan (PEP). You can invest up to pounds 6,000 a year in a general PEP, which can be used to hold most mainstream unit and investment trusts. All returns from PEPs are tax-free.

q Review your insurance cover. Many people in their fifties understandably start worrying about the costs of long-term nursing-home care. But tread warily - as Nick Conyers of Pearson Jones, an independent adviser, says, "The policies are very expensive and the risks are not that steep." The odds of needing residential care are around one in six and most people only stay short-term.

q Plan for inheritance tax. This applies only if your estate, which includes your home, is significantly more than the pounds 154,000 inheritance tax threshold.

q Write your will. If you die intestate (without having made a will) it can create serious problems for your family.

Tips for the 50s

DO/DON'T

Check what your current pension entitlements are.

Assume your pension will give you an adequate income in retirement.

Top up your company or personal pension if you can afford to.

Act without getting good, independent advice.

Consider remortgaging.

Switch without checking that the saving will cover the cost of the move within around 12 months.

Review the cost of your life insurance; you may be able to cut your premiums by switching insurers.

Cash in any endowment policy that is linked to your mortgage; there are usually hefty penalties.

Make use of tax-efficient investments such as PEPs and Tessas.

Invest for tax breaks alone.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
PROMOTED VIDEO
News
Teeth should be brushed twice a day to prevent tooth decay
education
News
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
news
Sport
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
News
Those who were encouraged to walk in a happy manner remembered less negative words
science
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
News
Renee Zellweger as Bridget Jones
i100
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Helpdesk Analyst

    £23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

    Senior Helpdesk Analyst / Service Desk Co-ordinator

    £27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

    Senior Pensions Administrator

    £23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

    Corporate Actions Administrator / Operations Administrator

    £25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

    Day In a Page

    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
    Ed Sheeran hits back after being labelled too boring to headline festivals

    'You need me, I don’t need you'

    Ed Sheeran hits back after being labelled too boring to headline festivals
    How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

    How to Get Away with Murder

    Shonda Rhimes reinvents the legal drama
    A cup of tea is every worker's right

    Hard to swallow

    Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
    Which animals are nearly extinct?

    Which animals are nearly extinct?

    Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
    12 best children's shoes

    Perfect for leaf-kicking: 12 best children's shoes

    Find footwear perfect to keep kids' feet protected this autumn
    Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

    Arsenal’s ray of light ready to shine again

    Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
    Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

    Moyes’ show of sensitivity thrown back in his face... by Ferguson

    Manchester United legend tramples on successor who resisted criticising his inheritance
    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Lonely Planet’s Best in Travel 2015

    UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London