the “legal side” of retirement in a box wills lasting powers of attorney - financial &...
TRANSCRIPT
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The “Legal Side” of
Retirement in a Box
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Wills
Lasting Powers of Attorney - Financial & Property Affairs- Personal Welfare
Nursing Home fees
Tax planning – Inheritance Tax
The “Legal Side” of Retirement in a Box
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Less than 30% of the population ever makes a Will
The intestacy rules apply if you do not leave a Will
Looking after your family, friends and charities
Don’t take risks on homemade Wills or unqualified Will writers
Problem Wills – complicated families, disputes, illness & incapacity
Your Will
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Who will look after your finances if you have a stroke, an accident or suffer from dementia?
What safeguards are there?
What is the alternative?
Lasting Powers of Attorney (Financial & Property Affairs)
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Why make one?
Who should you appoint?
Living Wills – what is the difference?
Lasting Powers of Attorney(Personal Welfare)
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Using the nil-rate band (£325,000)
The transferable nil-rate band and how it works
The important exemptions • Annual• Weddings (children, grandchildren & other)• Normal expenditure out of income• Business & agricultural property reliefs
Lifetime planning, gifts & trusts
Inheritance Tax Planning
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“One in six will live to be 100”
Source: Daily Mail, 30 December 2010
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Currently 12,000 people over 100
By 2050 there will be 250,000
Half the babies born in 2009 will live to 100
Life expectancy is increasing by 5 hours per day!
In 2008, 9.5 million people were aged 75 or over by 2033 this will increase to 17.3million
We are all Living Longer!
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What is a Pension?
State Pension
Employer Pension
• Defined contribution• Defined benefit/final salary
Individual Pension• Defined contribution
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Legislation – Changes!
Take pension benefits from age 55 (previously 50)
Pension commencement lump sum
• 25% of the fund
Remaining 75% of the fund must be used to provide you with an income
Trivial commutation - £18,000
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So How Much do I Need to Retire?
Aged 65
Income required x 25 = Fund Required
Remember the impact of inflation
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How Are We Doing?
Average fund at retirement £30,000
Source: ABI 2009
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What Type of Retirement Income can I Take?
Annuity• Inflexible• Guaranteed income for life• Amount can vary depending on individual
circumstances• Level or indexed linked• Add on benefits, e.g. guarantee period, spouses
pension
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Unsecured pension• Flexible• Market risk – no guarantees• Reviewed every three years• Flexible drawdown - £20,000 minimum income
guarantee
Phased retirement/temporary annuity• Enables flexibility
What Type of Retirement Income can I Take?
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How is my Pension Taxed?
At your highest marginal rate for tax
State pension is taxed, but tax is never deducted from your State Pension
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What Happens to My Pension When I Die?
Annuity• Dies with you, unless you have built in a guarantee of
spouses pension
Unsecured Pension• Provide a dependents pension• Can pass to a beneficiary as a lump sum minus a
65% tax charge
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What if I am not ready to retire?
Consider a temporary annuity
or
Unsecured pension
Delay taking pension benefits
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Important Considerations When Planning for Retirement
When do you want to retire?
How long do you think you will live for?
What other savings / investments do you have to fund your retirement?
Do you need to plan for dependents?
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Income Tax (IT)
Capital Gains Tax (CGT)
Inheritance Tax (IHT)
Taxation
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Still have to pay income tax on your income• Earnings• Pensions
- State pension - Private pensions
• Interest• Dividends• Rental and other income
Income Tax
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Still have personal allowances
• Age allowances (subject to income limits)– 65 to 74 = £9,940– 75 and over = £10,060
• Plan savings and investments to use both
spouse’s allowances
• Make good use of tax free savings such as ISA’s and Premium Bonds
Income Tax
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Capital Gains Tax
Principal Private Residence
Business Assets
Second Homes• Holiday homes• Inherited parental homes
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Annual Exemption (AE)• (2011/12 = £10,600 per person)
Inter spousal transfers to maximise AE
Appreciating assets v. Loans
Capital Gains Tax
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Inheritance Tax
Nil Rate Band (NRB)• £325,000 per person• Make use of both spouses NRB
IHT is payable on death at 40% on taxable estate
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Business Asset Property Relief
Charitable Legacies
Other Reliefs• Annual Exemption £3,000• Expenditure out of income• Small Gifts £250
Inheritance Tax
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Taxation remains an important part of your life;• After retirement• Even after death
A little bit of planning now can save money and worry in the future.
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