The “Legal Side” of Retirement in a Box

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

 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

 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)

 Why make one?  Who should you appoint?  Living Wills – what is the difference? Lasting Powers of Attorney (Personal Welfare)

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

“One in six will live to be 100” Source: Daily Mail, 30 December 2010

 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!

What is a Pension?  State Pension  Employer Pension Defined contribution Defined benefit/final salary  Individual Pension Defined contribution

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

So How Much do I Need to Retire? Aged 65 Income required x 25 = Fund Required Remember the impact of inflation

How Are We Doing? Average fund at retirement £30,000 Source: ABI 2009

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

 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?

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

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

What if I am not ready to retire?  Consider a temporary annuity or Unsecured pension  Delay taking pension benefits

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?

 Income Tax (IT)  Capital Gains Tax (CGT)  Inheritance Tax (IHT) Taxation

 Still have to pay income tax on your income Earnings Pensions - State pension - Private pensions Interest Dividends Rental and other income Income Tax

 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

Capital Gains Tax  Principal Private Residence  Business Assets  Second Homes Holiday homes Inherited parental homes

 Annual Exemption (AE) (2011/12 = £10,600 per person)  Inter spousal transfers to maximise AE  Appreciating assets v. Loans Capital Gains Tax

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

 Business Asset Property Relief  Charitable Legacies  Other Reliefs Annual Exemption £3,000 Expenditure out of income Small Gifts £250 Inheritance Tax

 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.