There are many things to consider as you approach retirement. It's good to start by reviewing your finances to ensure your future income will allow you to enjoy the lifestyle you want.

Seven tips to prepare your finances for retirement

State Benefits: If you receive benefits, let your benefit provider know when you are due to retire as you may have to claim a different benefit or the amount you get might change. Do not assume you are not entitled to any benefits. Each year up to £3.5bn of benefits go unclaimed by retirees.

Mortgage: Work out how much is left to pay on your mortgage. You may want to consider paying off a lump sum.
Personal Pensions: Locate and review your Personal Pension accounts, and gain a thorough understanding of your options for accessing your funds. We can support you in constructing your retirement plan, evaluating your existing accounts to ensure charges are competitive and your accounts are structured for longevity.

State Pension: Get an estimate of your state pension, the GOV.UK state pension calculator can help you with this.

Debts: Gain control of any debt and create a plan to get it paid off.

Consolidate Bank Accounts: Consolidate your accounts so you just have two accounts: one checkings and one savings account.

Plan: If you can defer taking pensions or other income until you have no earned income, you will likely benefit from a lower tax rate – it's worth discussing this with a financial advisor or tax advisor if you have one.

Additional tips on inheritance tax for retirees

Inheritance tax (IHT) is usually paid at 40% on the value of your estate (your property, money, and possessions) over the £325,000 ‘nil rate band’ allowance.
There’s also an additional ‘residential nil rate band’ allowance of up to £175,000 if you pass on your family home to children or grandchildren, although this gets tapered where your estate is worth more than £2 million.

Pensions: Pension funds are considered outside of your estate for IHT purposes, making them a valuable tool for maximising the legacy that you leave to your beneficiaries. It is often the case that you should spend what is considered inside of your estate and subject to Inheritance Tax before accessing your Pension Funds, to mitigate your IHT liability.

Be certain that your death benefit nominations align with your wishes in case of unforeseen circumstances.

Gifting: Gifting your money throughout your lifetime can be a good way of reducing your beneficiaries’ inheritance tax (IHT) bill. Every tax year you can gift up to £3,000 without it being counted as part of your estate.

Marriage Gifts and Donations: You can also make marriage gifts and donations to charities or political parties.

Gifts from Income: Another way to reduce your potential inheritance tax liability is by making gifts from income, although this has to be from excess income and not capital – it's important to take advice from a tax specialist before planning any such gifts

Trusts: if you have assets that you want to pass to family now, trusts can be an effective way of reducing the tax burden of these, and in turn reducing your estate for Inheritance Tax Purposes. Please get in touch if you would like to discuss this further.

Exemptions: If you leave your whole estate to your husband, wife, or civil partner, then no Inheritance Tax will be payable. You don’t need to pay Inheritance Tax on anything you leave to charity. If you have been widowed and all of your spouses assets passed to you, you may be entitled to their nil rate band threshold, and possibly their residential nil rate band too – speak to the solicitors involved to see if this is the case and if any of their exemptions were used at that point.

How Jerroms can help

It’s always a good idea to seek financial advice to ensure you are making the right decisions and that you’re not paying unnecessary tax. You also need to ensure you will have enough money to fund your retirement. Seeking financial advice will save you money in the long-term.

Our experts will look at all of your assets, work out the most tax-efficient way for you to fund your retirement and then create a personalised plan.