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.