ow can savers ensure they have sufficient funds to maintain living standards through a potentially far longer retirement? This problem was made significantly harder with the government announcement that it was cancelling planned reforms to long-term care funding in England, due to the cost. These had been scheduled to start in 2025 and may have limited care costs for many older people, particularly those needing residential care and help with day-to-day living tasks. PLANNING FOR THE TWILIGHT YEARS For those heading towards retirement, the lack of such reforms adds to the difficulty of planning for the twilight years. While spending on essential bills may remain fairly constant in retirement, discretionary spending on things like travel and entertaining is higher in the early years of retirement, but typically declines as people enter their 80s. However, costs can rise significantly if care is then needed, whether at home or in a residential setting. None of us know exactly how long we’ll live for, or what our health needs will be, so building a decent retirement fund is key to providing flexibility, regardless of circumstances. When it comes to planning for a long retirement some core considerations are: ■ Save what you can: The more you can save while working the more flexibility you’ll have in retirement. Start early to benefit from compound growth, and make the most of tax-efficient wrappers, such as pensions and ISAs to further boost returns. ■ Be flexible around retirement dates: If you can work for longer, even on a part-time basis, this can help make pensions and other savings last longer, as they will effectively be funding fewer years. And it can be good for your health. ■ Don’t cash in pensions early: You can access your pension funds from the age of 55, but just because you can, doesn’t mean you should. It might be tempting to access these funds for holidays or home improvements, but be aware this can seriously reduce funds available for the later years of your retirement. ■ Seek advice on income options: Annuities offer a secure income and will continue to be paid for life, however long that is, but may represent poor value if you die young. You will also have to pay more for an annuity with income that increases annually to help keep pace with inflation. Drawdown, where funds remain invested, offers more flexibility but less security. A blended approach can offer a degree of flexibility but with the peace of mind that at least some income is guaranteed for life – however long that might be. Seeking advice is imperative. ■ Take a holistic view of your finances: For many people it is unrealistic to save enough to cover day-to-day living expenses through retirement plus potential care costs. But other assets, such as a property, could be sold to pay for care should the need arise. ✢ Occupational pension schemes are regulated by The Pensions Regulator. Credit:oneinchpunch/Shutterstock.com RETIREMENT Could you afford to live to 100? The number of people reaching their 100th birthday is expected to treble over the next 25 years, raising a long-term, financialplanning challenge. H 7
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