Article by Phil
Financial Planning advice to help you leave a legacy
Scottish Friendly have just looked at what people want to do with their money when they die which will need Financial Planning advice.
The survey makes for interesting reading and provides an insight into what is important to people. The list found that:
- 72% of people wanted to pass their home onto their children.
- 55% wanted to give a cash lump sum to their family.
- 32% want to be able to pass on their pension.
- 17% want to be able to gift their investments including property portfolios.
- 10% had a business that they wanted family to inherit.
- Overall, 21% of people surveyed wanted to be able to have some legacy to pass on to their children, family and friends.
But, according to St James Place things will change as the next generation will be able to pass less on because of rising costs of living. Their survey also found that:
- 55% of future retirees did think that they would have to support their family after retirement and through their legacy.
- Although 25% didn’t think they were properly prepared for this.
- Only 45% thought that they would be able to pass on their property.
- And only 40% thought they would have any cash to leave to their family.
According to Continuum many people are still worried about whether they will have financial freedom in retirement, which shows how much Financial Planning advice is needed:
- Only 30% of 45- to 54-year-olds are confident about their financial future, whereas.
- 53% of over 55’s are confident, but only:
- 32% of younger 35 to 44 year have confidence in their futures.
- 53% of married couples remain confident, compared to
- 28% of single people and
- 31% of those living together
This is despite the massive financial planning wealth transfer which is underway.
Inheritance Tax and Financial Planning advice.
People will also increasingly need to factor in calculations about Inheritance tax (IHT). IHT receipts have doubled since the tax thresholds were last revised back in 2008. In the last four months £2.8 billion was collected, meaning that over £8 billion is likely to be paid in the next year.
Increasing taxes are also a concern. Research from Quilter estimates that 3.1 million pensioners will be paying higher rate tax by 2027. That’s 20% of all pensioners. 1.3 million of those will be over 70. Planning your tax efficiency will become increasingly important even after retirement.
Although almost one third of people say they want to leave the remainder of their pension to their family, less and less people are likely to have a pension to leave in the first place. A recent survey by Hargreaves Lansdown found that 70% of higher earners are currently on track for a “moderate retirement” and only 40% are on track for a “comfortable retirement”.
A moderate retirement is current set at £36,500 for a couple and a comfortable retirement is £58,500 for a couple.
It’s important to also check that you are receiving all the pension income that you’re entitled to. For example, the Department of Work and Pensions (DWP) have acknowledged that they underpaid over £500 million in state pensions between 2021 and 2023. They have written to those affected and their families, but the latest figures reveal that over 1,800 people haven’t yet responded to the letter offering to pay the underpayments. Please make sure that doesn’t apply to you. Whilst a lot of the figures being repaid are relatively small, in some cases over £100,000 has been refunded.
The same applies to lost pensions. The latest estimate from the Pensions Policy Institute is that there was £27 billion in lost pensions in the UK. The average value was over £16,000 for over 55’s. So, it’s worth using a pension tracing service to try and find any lost pensions.
ISA saving
Nearly 4 in 10 people in the UK ISAs to save for their retirement according to LV. The figure rises to 6 in 10 for over 55’s.
You can save up to £20,000 a year into an ISA tax free so it can be a good way to save for some people, but it might be worth taking Financial Planning advice to see what’s best for you.
