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<!DOCTYPE HTML PUBLIC "-//IETF//DTD HTML//EN"> <html> <head> <meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1"> <meta name="GENERATOR" content="Microsoft FrontPage 2.0"> <title>Untitled</title> <link rel="STYLESHEET" href="style1.css" type="text/css"> <base target="_top">  </head> <body bgcolor="#FFFFFF" topmargin="0" leftmargin="0"> <table border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td valign="top"><table border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td align="right" valign="top" width="174"><a name="top"> </a> </td> <td align="right" valign="top"> </td> </tr>  <tr> <td align="right" valign="top" width="174"> </td> <td valign="top"><a><img src="mi_logo.GIF" width="200" height="36"></a> </td> </tr> <tr> <td align="right" valign="top" colspan="2"> </td> </tr>  <tr> <td align="center" valign="top" width="174"><img src="006002.jpg"><table border="0" cellpadding="0" cellspacing="0" width="138"> <tr> <td align="right" valign="top" width="138">C O N T E N T _______________ <A HREF=#1 target=_self>Financial Planning </A> <A HREF=#2 target=_self>Your Pension </A> <A HREF=#3 target=_self>Existing Borrowing </A> <A HREF=#4 target=_self>Life Assurance </A> <A HREF=#5 target=_self>Protection Against Failing Health </A> <A HREF=#6 target=_self>Providing for Your Grandchildren </A> <A HREF=#7 target=_self>Making a Will </A> <A HREF=#8 target=_self>IHT Planning </A> <A HREF=#9 target=_self>Using Your Capital </A>Expert A s s i s t a n t <SCRIPT LANGUAGE=VBScript></SCRIPT> </td> </tr> </table> </td>  <td valign="top">Planning for Retirement by <A HREF="money:navigate/guide/guide/010004.html">Caroline Whitehead</A>, specialist writer and adviser to leading UK financial institutions. With more people living longer and retiring earlier, the period of retirement can be a substantial part of your life. About one person in five is over retirement age, and most are fit and ready to embrace new challenges and enjoy the opportunities that increased leisure time can bring. Most people retiring today will have at least 20 years of active life ahead of them. More and more people are retiring early, and some even have another career ahead of them. One key to a happy and secure retirement is planning early. If you have 20 years before you retire, you may not be ready to plan your activities, but you should think about your financial situation. The earlier you do this, the less onerous it will be. <a name=1>Financial Planning</a> Careful planning is the key to ensuring your financial security. As you approach this new stage in your life, your financial and tax position will change considerably and you will need to take a look at all aspects of your finances. A review of your new levels of income and expenditure will be an important first step in your financial planning. Remember that your outgoings will change considerably. You will need to take into account income from any inheritances as well as from your pension(s) and investments, including any bank or building society interest, all of which may be taxable. Balance these against your likely outgoings in the first few years, such as fuel, food, cost of running the car, holidays. It is important that you plan your investments so that you achieve a realistic balance between achievable income and capital growth to protect your savings against inflation. If you consult a financial adviser, he or she would be required under the Financial Services Act to conduct a fact find to gather information on which to base their advice. Clearly, not everyone will be able to afford all the alternatives suggested below. (See also <A HREF="money:navigate/guide/guide/001011.html">Tax for Older People</A> and <A HREF="money:navigate/guide/guide/007003.html">Income versus Growth</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=2>Your Pension</a> One of the most important aspects of your financial security in retirement will be your pension. Do not think that the state pension will provide you with an adequate income in retirement. State funding of pensions is gradually reducing and more and more people are being encouraged to make private arrangements. Those who planned early will be able to enjoy a good level of income from their pension. If you are contemplating retirement and are worried about the level of income you receive, there are some extra ways of supplementing your pension provision.</td></tr><tr><td align=center valign=top><TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=138 BORDER=0><TR VALIGN=TOP><TD valign=top align=right WIDTH=138><A HREF=money:navigate/guide/guide/222001/12>G L O S S A R Y ______________ AVCs</A></TD></TR></TABLE></td><td align=left valign=top> If you are currently working for an employer and are in an occupational pension scheme, one way of helping to improve your pension in retirement is to make further contributions to that scheme via <A HREF="money:navigate/guide/guide/006007.html">additional voluntary contributions</A> (AVCs), or buying free-standing AVCs from another pension supplier. If your employer does not operate an occupational scheme, or if you are self-employed, then you may build up a fund for your retirement through a Personal Pension Scheme. Pension contributions still represent a very tax-efficient way of saving for retirement, especially if you are a higher-rate tax payer. (See also <A HREF="money:navigate/guide/guide/001007.html">Tax and Pensions</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A><A HREF=money:navigate/guide/guide/222001/78>G L O S S A R Y ______________ MIRAS</A></td></tr></table></td><td align=left valign=top><a name=3>Existing Borrowing</a> As you plan your income and expenditure, you may wish to consider repaying any loans you have outstanding to relieve your monthly outgoings. As a general rule you should consider the rate of interest you are paying on your loan, less any tax relief, and compare it with the net return you might be able to get on the money if it were invested. Many people are already committed to paying off their mortgage at retirement, either with the maturity of an endowment policy or they may be obliged to if the mortgage is linked to a personal pension plan. If you do have a choice, think very carefully about paying off your mortgage, especially if this will leave you short of money to live on. Consider the option of reducing it down to the MIRAS limit of ú30,000, so that you can retain the tax relief available. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=4>Life Assurance</a> Your protection arrangements may also need to be reconsidered. While you were working, you may have been covered for death-in-service benefits. The death benefits that attach to your pension in retirement will be different and you will need to take this into account when looking at your life assurance provision and protection for your family. Examine the policies you already have. It is usually cheaper to increase your sum assured with an existing policy: a new policy may require a medical examination and you may have to pay an additional premium if you are not in good health. Many flexible policies allow you to step up your life cover with no further evidence of health. So, if you are in good health, take advantage of the rates you can secure now. (See also <A HREF="money:navigate/guide/guide/005006.html">Life Assurance</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=5>Protection Against Failing Health</a> Long-term sickness can bring about financial hardship for many who do not have adequate arrangements in place. While in employment, you are usually assured of a continuance of pay during your period off work, at least for a certain length of time. In retirement, you will, of course, continue to receive your pension, regardless of your state of health. However, a long-term sickness or disability could mean that you need constant medical attention, alterations to your home or car, help with housework, shopping etc., or it could prevent you earning from either a part-time or full-time job. There are now policies which pay out a lump sum on the diagnosis of a critical illness, which is the time when you may have need of extra money in the form of such a lump sum. Private medical insurance offers you and your family medical treatment in the event of illness and you might wish to consider this in addition to any critical illness cover. There are also special plans now available to help pay for the cost of long-term care in case you need full-time help over a long period of time. The cost of care for the elderly is considerable and the earlier you can put some money aside for yourself the better. (See also <A HREF="money:navigate/guide/guide/005009.html">PHI and Critical Illness Insurance</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A><A HREF=money:navigate/guide/guide/222001/3>G L O S S A R Y ______________ Accumulation and maintenance trust</td></tr></table></td><td align=left valign=top><a name=6>Providing for Your Grandchildren</a> Some grandparents find that retirement provides an opportunity to set aside a certain amount for their children and grandchildren. You may also like to consider one of the many ways of helping with your grandchildren's education through a school fees plan. These can be very cost-effective, especially if started when the child or children in question are very young. School fees are expensive and the state support for students, through the grant scheme, is diminishing. You will be surprised what can be accumulated for educational purposes, tax-free, for a modest sum each month. Another means of setting money aside for the benefit of grandchildren is through an Accumulation and Maintenance Trust, which attracts beneficial tax treatment, provided the income paid out is only used for the education, maintenance and benefit of those under 25 and the capital is eventually for their benefit. The use of trusts can be very effective, but it is always worth seeking advice to ensure you are taking the appropriate steps to achieve your objectives. You should also consider the cost of setting up and maintaining a trust as compared to the sum available to go into trust. (See also <A HREF="money:navigate/guide/guide/007014.html">Savings for Non-Taxpayers</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=7>Making a Will</a> If you have a family, the chances are you will have already made a will. If you haven't already done so, now is a good time to make one and even if you have, it is worth reviewing it if your circumstances have changed. When you die, your property (called your estate) must be properly administered. Affairs must be wound up, property and possessions passed to relatives or friends, or sold, debts paid and inheritance tax (IHT) paid. A will ensures that this is done quickly and effectively, in accordance with your wishes. It is an important document and should be prepared by a professional. If a will is drawn up without professional assistance, the contents can cause arguments and expense and may have results very different from those you intended. A will can also be used as part of an IHT planning exercise. </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=8>IHT Planning</a> Broadly speaking, IHT is a tax on any transfer of value as a result of which your estate is reduced. This can occur during your lifetime and is deemed to have occurred immediately before your death, as you pass your estate to your heirs. IHT also arises on certain lifetime gifts where the rate is half that payable on death and due when the gift is made. Your estate includes your house, car, house contents, investments, money and any insurance policies which are not written in trust. The current rate of tax is 40 per cent and, on death, it is paid as a flat percentage of all your assets over the ú215,000 threshold. Indeed, the Inland Revenue could be the largest beneficiary of your estate, and they get paid first! Ways of mitigating IHT can be quite complex and often a combination of actions is necessary. You should always take professional advice from an experienced person who can guide you through the options and their consequences. (See also <A HREF="money:navigate/guide/guide/001013.html">Tax and Gifts</A>.) </td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self>ß B A C K _____________ to the top </A></td></tr></table></td><td align=left valign=top><a name=9>Using Your Capital</a> If you have immediate need of funds at the point of retirement, it is often best to draw on your capital to meet this short-term need. For example, you may decide to take a long holiday after all your years of hard work, or you may buy a new car or undertake some home improvements. These items of major expenditure need to be planned in relation to retaining sufficient reserves, in addition to your general cash reserve. If, on the other hand, you expect to have to draw on your capital regularly to supplement your income, you may need to take a fresh look at your level of expenditure, or the amount of income your investments are generating in order to avoid draining your capital away too quickly. You will need to examine the rate at which your investments are growing in relation to the amount of withdrawals you intend to make. Remember, your capital represents your financial security and independence.N E X T T O P I C <A HREF=money:navigate/guide/guide/006003>State Pension Provision</A>To access further financial articles, have a look at <Spann Class=MSNLink>MoneyManager on MSN! <a href=http://MoneyManager.uk.msn.com><img src=msn_logo.gif border=0 align=top></a> Copyright 1997 Microsoft Corp.</td> </tr> </table> </td> </tr> </table> </body> </html>