“Mid-lifers need to be checking whether they have saved enough, how and when they can afford to start withdrawing money and if their investment strategy needs to change.”
Key considerations
Retirement planning during the mid-life phase should include a critical assessment of the things clients are likely to want to do in later life.
Having a clear picture of this will help both the client and the adviser to plan accordingly, says Mark Stewart, director of Huddersfield-based Sheards Wealth Management.
He explains that a financial assessment should accompany this, which includes an appraisal of a client’s current liquid wealth, money tied up in property or current pension pots, income from salaries, dividends, and any child benefits.
An estimate of future retirement income can be made by including state and private pension projections, according to Mr Stewart, who says that the adviser should also consider the future cost of living, including inflation and future large purchases, such as the weddings of their client’s children.
Tax implications
A further consideration for mid-lifers is tax – specifically inheritance tax (IHT).
With property prices having increased significantly over the past 20 years, more clients are subject to IHT.
There are a multitude of choices to ensure clients pay the correct amount of tax, while protecting their retirement pots, according to Paul Latham, managing director of Octopus Investments.
“If you have questions about inheritance tax – as a first step you can use calculators online such as the IHT calculator on the Octopus website, or go on the HMRC website for examples of different scenarios,” he says.
Mr Latham notes that client investments in the Alternative Investment Market (AIM) can qualify for relief, if they are invested in shares that qualify for Business Property Relief (BPR), and are held for two years or more.
“For people that have a higher risk appetite they should look at other longer term investments such as venture capital trusts, which offer 30 per cent income tax relief and tax-free dividends,” he adds.
Joe McGrath is a freelance financial journalist
