How To Save In Later Life
Understand Your Financial Situation
“Before you begin to add to your savings, you must first work out what your current financial situation is and whether it might be changing. Many of us have made substantial savings on costs like travel, restaurant bills and trips out with friends and family over the course of the pandemic, so might have been able to build up some savings. On the other hand, the last year might have resulted in further financial pressures – for example, those supporting grown-up children or business owners. Whatever your situation, draw up a plan of where things stand, taking into account monthly outgoings, your mortgage, your pension plan and how much debt you have. In your fifties and beyond, it’s likely that you’ll be saving for a rainy day or something specific like a big family trip, so write down your goals so you can make realistic payments towards them.” – Zoe Dagless, investment planner at The Vanguard Group
Tackle Debt Head On
“There are a few things you need to get your head round before you start saving. First, you need to tackle any debts you may have. Start with those charging you the highest interest as these will cause a significant drag on your finances. Look to consolidate your debts into more manageable payments and cancel any unarranged overdrafts.” – Rosie Hooper, chartered financial planner at Quilter
“When paying off payday loans, credit cards or other lump sums debts, you want to do it as quickly as possible, without causing detriment to your financial situation. There’s no point paying off a credit card if it’s going to send you into an unplanned overdraft, or paying your mortgage off early if that means you won’t be left with enough money to live on. There are lots of great apps to help you tackle debt – Quoins is one of the best.” – Sarah Harding, investment banker at TSB
Compare Bank Accounts And Interest Rates
“People used to go to their bank for everything – a current account, a savings account, mortgages, investments etc. Those days are now long gone and many of us now use multiple banks or shop around for the best interest rates. Part of this is because interest rates are so low and paltry right now, which is enticing people to shop around. This is especially worth doing if you’ve had the same account for the last 20 or 30 years. With inflation rising, you can’t afford to sit there and let your cash return nothing. This will mean you are actually losing money in real terms as inflation eats away at it. Instead, you need to make your money work as hard as you can to ensure it grows as much as possible. The best place to start is working out how much you want to save and for how long – the longer you can put it away, the better the interest rate on offer. Shop around and look at the whole market to see what’s available – don’t rely on your bank to give you a good interest rate, even if you are a loyal customer.
“Once you have identified some potential places for your savings, compare this to the best buy lists available on most financial websites. Also, it’s not just the rate you have to think about. Make sure the provider you are going to invest your savings with offers FSCS protection so, if it were to go bust, up to £85,000 of your money is safe. Other things to consider are customer service ratings and how you would interact with them – some savings providers are now 100% digital, so make sure you are comfortable with that before proceeding.” – Rosie
“When switching banks or finding a new savings account, the top considerations are: interest payments, tax efficiency and ease of access. Many online sites will tell you about the accounts with the best deals on interest – but make sure to check whether they’re only short-lived for a few months. Bear in mind that online accounts tend to offer better deals, but don’t be put off by the hassle – it’s very easy to switch accounts these days. The Current Account Switching Service helps you compare them easily online.” – James Appleby, financial advisor at Tees Law
Set Long-Term Goals
“Your 50s and 60s are usually your last full decades to build up your long-term savings ahead of retirement, so it’s the ideal time to take a moment to consider your current savings and how they match up with your plans for the future. Through your career, you may have held a number of different roles and each may come with a past pension, so it’s important to take stock of all the long-term savings you may have accumulated from private and workplace pensions, as well as any other longer term savings, to get the full picture. From there, consider your retirement goals and what you hope to do in your later years. It’s important that your finances are able to match up with your aspirations so by taking the time to ask these questions now, you can take the steps to increase savings as needed, whether that’s contributing more into your pension, asking your employer to match those contributions, or making use of all the tax reliefs available to you.
“There are many tax reliefs or options available to help with longer term savings, but many people just aren’t aware of them and so they’re not often fully utilised. For example, grandparents looking after young grandchildren while their parents are working are eligible for national insurance credits. These credits go towards your state pension and so, by claiming them, you can make up any shortfall you may have. This is called Specified Adult Childcare credit and must be applied for and, if you’re eligible, they can be awarded retrospectively from 6th April 2011.” – Emma Watson, head of financial planning at Rathbone Investment Management
Store Away Lump Sums Carefully
“We all dream of receiving a large sum into our bank account, but many of us don’t know what comes next. Resist the urge to spend it immediately and take a step back. Consider your current financial circumstances – do you have a debt or a mortgage you could pay off, or are you trying to save for something in particular? Once you have a better idea of your financial objectives, you can start putting the money to work. If you think you will need the money in the short term, make sure it’s easily accessible. Easy access ISAs or Premium Bonds from NS&I can be a good place, but make sure you check the rate before putting the money away. On the other hand, if you are looking to grow the money over the long term, then you should be considering investing it. Putting money to work in the stock market for five years or more gives it the best chance to grow at a greater rate than inflation. There are many services out there that can help identify the best investment account for you and what to invest in.” – Rosie
Reassess Your Investments
“It’s never too late to start investing in stocks and shares, which you can use your ISA allowance for by investing in stocks and shares ISAs. An ISA allowance is the set amount you can put into the account each tax year, without paying tax on any interest they make, so it’s definitely something to be aware of when it comes to saving money. There is a huge range of cash ISAs out there, so make sure you do your research to ensure you’re getting the best deal possible. Although stocks and shares can sound intimidating and complicated, they don’t have to be, as you can invest a small amount of money into index trackers such as the FTSE All Share Index tracker, which goes up and down with the stock market and does a large part of the leg work for you.” – spokesperson from Curious Cat App
“Anyone with existing investments should also take a close look at what they already own. Don’t leave this until the end of the tax year, which many of us typically do. You might shy away from the idea of investing when markets have experienced a period of turmoil, but investing when share prices have weakened can present really strong opportunities for long-term investors.” – Zoe
Review Your Joint Accounts
“Saving as a couple comes with a myriad of things to think about. Not only are you thinking about saving for your own benefit, but also your life together and what that will bring. Having an honest conversation about money is always the first step to a happy financial relationship. Discuss your aspirations and what you want to do in life, and from there you can create savings goals and pots together. Furthermore, if you have a house or a family, you will want to consider protecting them should the worst happen. It might be unpleasant to think about, but make sure you look into wills and protection in order to make your family is looked after in the event of your death. However, if you are saving as a couple or arranging your finances jointly, it is crucial you are both engaged in the process.
“Also, if you’re both engaged and aware of how your money is working, should the worst happen and you get divorced, it will be easier to split the assets fairly and have an equitable distribution of them. Divorce can be an incredibly stressful time, often made worse by having to think about money and finances. But for women, in particular, divorce can leave a devasting financial impact. Official figures showed just 14% of divorces contained some sort of pension settlement order, but as people divorce later, you may find you have less time to build a retirement income if you did not have a pension of your own. This is a particular issue for women, as 45% aged 65 or over have no private pension wealth at all, according to the ONS.” – Rosie
Keep Track Of Your Pension
“When saving, one of the most important things to look at is your pension. It’s important to get an idea of how much money you have built up over the years, as most people will have had more than one employer in their lifetime and therefore more than one pension scheme. To save yourself the hassle of having multiple pension pots, it might be worth transferring and combining them under one roof. However, it’s important that you make sure you won’t lose any benefits of some schemes or have to pay any excessive exit fees. Another thing to take into consideration is when you might want, or need, to finish work. With the retirement age getting later and later, knowing when you want to stop working is something you should probably have a think about, if you haven’t already. More people are choosing to reduce their working hours and, instead, take a step down into semi-retirement first, rather than cutting out work cold turkey. It’s also worth thinking about how long your pension actually needs to last. It can be tempting to withdraw from it, but without proper planning, you could find yourself running short on funds a lot faster than you may have anticipated.” – Pete Mugleston, managing director and money expert at Online Money Advisor
“Many people won’t have made enough national insurance contributions to qualify for a full state pension. However, by making a savvy one-off payment, in many cases of just a few hundred pounds, you could make up for some of the gaps in your national insurance record, by effectively buying extra qualifying years. You can only top up any gaps in the previous six years, but this could have a big impact on what you’ll get when you retire. If you can’t remember if you have entitlement from former employers, you can use the Government’s free Pension Tracing Service to find any old pensions you might have lost track of.” – James
“Most women often retire with less money in their pension than men, which is largely due to maternity leave or time off work to take care of their family. In order to make up for the loss in pension contributions during this time, it may be possible to make use of the ‘Carry Forward’ rules. This allows you to make use of any unused annual allowance from the previous three years, meaning you can save more than the annual £40,000 into your pension in a certain year.” – Emma
Consider Getting A Financial Adviser
“It is always worth visiting impartial websites such as Moneyfacts or Which?, who can give you the big picture of what is available on the market, as well as give you tips on how to get started with your savings journey. But don’t just think about doing it yourself. If you are uncertain where to start or are short on time, you might want to consider speaking with a financial adviser. They will help you create a tailored plan specifically for your circumstances. Financial advisers can help create a plan that will see you through the ups and downs, while also tweaking it according to your real-time circumstances. Other services such as Citizens Advice or Step Change can help you with debt advice, too. – Rosie
“If you have received a lump sum payment such as an inheritance or a divorce settlement, or you’re deciding how to save for retirement, a financial planner can play a significant role. They will help you put together a financial plan that takes in your short, medium, and long-term goals and can ensure that you have enough money to reach them. The planner can also help to ensure you have provisions in case you need care in later years or if you plan to provide for family members. However, finding the right financial planner is important. This should be a long-term relationship where you will discuss some very personal matters, so ensuring you’re comfortable with the professional that you’re dealing with is paramount. – Emma
Get Rid Of Unnecessary Subscriptions
“It might sound obvious, but one of the quickest ways to save money is so cut down on your subscriptions. As you move into later life, think about what you can live without and where you can save money – are you still paying subscriptions for your children? Can you scale back your gym membership or buddy up with someone for music and streaming services? You’d be surprised just how many people continue to pay subscriptions, standing orders and direct debits without even realising. Thoroughly reviewing your actual outgoings is an opportunity to identify any further savings. All of this will accumulate extra money at the end of the month which can go into savings or be invested. – Zoe
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