Approaching retirement and worried about your finances?
Don’t despair, help is at hand
Financial help in retirement exists in many places.
With retirement staring us in the face, things can start to feel just a little bit too real.
All those years ago, when we were advised to save for our retirement, it just felt like that day was never going to come.
Suddenly, 40-odd years have whizzed by. The kids grew up and are making it on their own.
We’ve got wrinkles and maybe grandchildren. Things once over the horizon, yet here they are.
If you didn’t take the advice, you are certainly not alone. Or maybe you did take it, but as the time nears, you’re still getting a little nervous.
Here we are going to show you that, whatever your situation, it’s never too late to take steps to boost your pension – and there’s probably more government financial help in retirement than you realise.
In fact, up to £3.5 billion from just two of these offers goes unclaimed every year.
We’d like to show you exactly what is available and how you might ease some of those retirement money worries.
Generally speaking, there are two types of retirement pension people can claim. One is the state pension, the other a work based/private pension.
To claim a state pension, you need:
- To be of state pension age
- Have at least 10 to 35 qualifying years of National Insurance contributions
These criteria will provide a state pension which, at the time of writing, can be as much as £179.60 (2021/2022) each week.
As financial advisers we see many people looking for financial help in retirement who haven’t achieved the 30 qualifying years. Sometimes this has meant a reduced state pension, in some circumstances no entitlement at all.
If this is where you find yourself, there are a few options to look at.
Defer your state pension
You will not automatically receive your state pension when you reach state pension age: you will receive a letter two months beforehand.
If you want to start claiming, then you need to respond. If you want to defer your pension, then you simply do nothing.
This can see the value of your pension increase during the time you are not claiming. In fact, it increases by 1% for every nine weeks that you don’t claim.
It is worth taking advice before pursuing this option as there may be tax implications.
Make voluntary National Insurance contributions
If you haven’t made up the full 30 years of contributions, all is not lost. It may be that you had a low income during employment or self-employment and this has left you short.
If that is the case then there is the option to make voluntary contributions to boost you up to where you need to be.
To receive a State Pension forecast tailored specifically to you and based on your national insurance contributions to date, you can apply for a State Pension forecast.
Support for married couples or those in civil partnerships
If you are unable to claim the full state pension because your National Insurance contributions have fallen short, you may be eligible for a top-up of £82.45 per week providing much-need financial help in retirement.
This is by tapping into the contributions made by your spouse or partner.
Pension credit is available for those who are on a low income and need assistance with day to day living costs.
This is eligible even to those with an income as well as to homeowners and is definitely worth exploring as an option.
What other Government financial help in retirement is available?
There are numerous senior benefits that can be tapped into, but many retirees are either unaware of these or assume they won’t qualify.
If you have any concerns about your finances as you near retirement, it makes sense to explore these as early as you can.
You will probably be pleasantly surprised at what is out there and what you are entitled to.
Some of the senior benefits that can be of great assistance include housing benefit, council tax reduction, and heating allowance.
Let’s have a look at these in turn:
Housing benefit/mortgage support
Although you may have heard that many of the previous benefits have been unified into the single Universal Credit, there are still benefits that exist separately at state pension age.
Housing benefit is one of these, and if you are claiming pension credit there is a good chance that you’ll be eligible for this, too. It is a payment to help towards your rent payments.
There’s also Government financial assistance available if you own your own home, too. It’s possible to receive a contribution to the interest on your mortgage payments.
This is likely to have implications when it comes to selling your home, so it is important to seek expert advice before committing to this route.
Council Tax Reduction
This was once known as Council Tax Benefit but saw a change in its name back in 2013. This is a benefit you can apply for if you are on a low income and if you are receiving other benefits.
Council Tax can be a sizeable expense each month, chipping away at your disposable income so we strongly recommend checking your eligibility.
Depending on your circumstances, it’s possible to see your bill reduced by 100%.
There are two forms of Government financial assistance that can help with keeping your home warm.
Living in one of the richest countries in the world, it is hard to believe that people are left to choose between food and heat.
These payments come in to support those facing that struggle. The payments available are known as the Winter Fuel Payment and the Cold Weather Payment.
The Winter Fuel Payment is automatically awarded to those of state pension age.
There is no need to apply and the benefit can see you receiving between £100 and £300 towards your heating costs.
The Cold Weather Payment is linked to other benefits you may be receiving and sees assistance where the temperature falls to zero degrees Celsius or lower for seven consecutive days.
This is another one of the benefits available as it is only open to people who are of state pension age or older.
To qualify for attendance allowance, as well as meeting the age requirement, you also need to have a disability for which you need assistance.
This can be either a physical or a mental disability. You can be awarded between £60 and £89.60 per week if you are eligible.
Are there ways to boost my other pensions?
It may be that retirement is fast approaching and, after doing the sums, you realise that your workplace pension isn’t going to deliver quite as much as you had hoped.
We all hope for a secure retirement, one we can enjoy without the stresses of money worries.
So, aside from available Government financial assistance, what can you do to boost your retirement income? Here are a few things to consider – even if retirement is getting remarkably close:
Start paying more in
No matter how close to retirement you are, it could be worth increasing your pension contributions.
Boosting your workplace pension won’t necessarily disqualify you from pension credit and housing benefit, so there is a chance that you can combine the three and be much better off in your later years.
There are some employers who will match your contributions, so even if you only increase these by 1% they can still have a positive effect.
Use any lump sums
It is not just monthly contributions that you can increase. You can also make one-off lump sum payments if you want to.
It is not always possible to do this, but if you suddenly experience a windfall, you could do worse than adding it to your pension pot.
Defer your pension
Just like with the state pension, there is no requirement to start drawing your workplace pension straight away.
If you can cope without the income initially it may be worth waiting before starting to receive your monthly payment.
There may be charges involved when it comes to delaying your pension, so make sure you check this out before committing yourself.
Resist the pay-out
There is an entitlement to benefit from a lump sum from your workplace pension from the age of 55.
You can withdraw as much as 25% of this and, even better, it is tax-free.
However, as appealing as this may seem, the longer you can leave it in your pension pot, the more opportunity it will have to grow.
If the income from your pension is going to leave you with a significant shortfall and you have already explored financial help in retirement including the likes of Pension Credit, Housing Benefit, Council Tax Reduction, and other forms of Government financial assistance then it may be worth considering carrying on working for a time.
Some people choose to do so because they can’t quite comprehend not working anymore.
If it is a financial necessity, then it doesn’t mean that you will have to work full time. Work out exactly what you need so that you can budget and establish how many hours you would need to work.
How much do I even need in retirement?
It’s okay to be looking at an imminent retirement and having a moment of panic, but how many of us really know how much we will need in our retirement?
The common approach is perhaps to look at what we were earning before we retired and aim to match that. If this is your approach you may be setting yourself up to fail.
It is often the case that in retirement you won’t necessarily need quite as much as you did when you were working.
It is fair to assume that most of us hope that by the time we have reached retirement age, we will have at least cleared any outstanding mortgage.
Hopefully, any children will be standing on their own two feet and not quite so reliant on our help.
With some of these expenses gone, a recent survey by Which? suggests that people need between a half and two-thirds of their previous income to have a comfortable retirement.
To hit an annual income of £26,000 a year, which saw most pensioners enjoying a good life, there needs to be between £154,000 and £265,000 in your pension pot.
Help is at hand – make sure you take it!
We hope that, if you’ve stuck with us this far, you are feeling slightly more confident about approaching retirement.
For those who feel that their finances aren’t quite where they would like them to be, we hope you’ll be inspired to seek the help and assistance you’re entitled to.
It may be that you have no experience of Government financial assistance as you have gone your whole working life without it.
That doesn’t mean you shouldn’t now seek that to which you are entitled. As a reminder, the key assistance you should be exploring includes:
- Pension Credit
- Council Tax Reduction
- Housing Benefit
- Attendance Allowance
Still puzzled? Bring in the experts
There are times when trying to get on top of everything yourself gets a little too much.
Certainly, when you are looking at ways to get the best out of your pension, you’ll need help and support to point you in the right direction.
If you’re looking for a professional adviser to help set you up for a happy retirement then we would love to be of assistance.
Why not get in touch today and begin planning for a happier future?