MONEY MATTERS
If retirement feels like a struggle, examine your finances
to limit unnecessary spending and exploit your existing
resources. It's called downsizing, and a little effort
makes a big difference.
Clear your debts
The last thing you want to do is retire with mortgage debt
hanging over you, but this happens to one in seven people
over 65. They typically repay more than £4,000 a
year, which eats up almost a third of their income. Don't
let this happen to you. Check you are on course to clear
your debt by retirement, and if not, boost monthly repayments
or pay in extra cash.
Also target any credit card and personal loan debt, to start
your retirement on a sound financial footing. Remember, there's
no point leaving money sitting in a savings account earning
four per cent if you're paying 15 per cent to clear credit
card debt.
Switch your current account
If you have a current account with one of the big four high
street banks — Barclays, HSBC, NatWest and Lloyds
TSB — you could probably get a much better deal elsewhere
as these banks typically pay just 0.1 per cent interest
on current accounts but apply hefty penalties if you ever
go overdrawn.
The Consumers' Association now runs a website that helps
you find a better deal, and demonstrates how simple it is
to switch. It also shows you whether you can save money by
switching to a rival mobile phone tariff, energy supplier
or tour operator.
The Consumers' Association website:
www.switchwithwhich.co.uk.
Review your savings
If you have to rely on your nest egg to eke out your pension,
keep one eye open for the best returns. Check the latest
best-buy savings accounts in your weekend paper or via
the Internet.
Your deposit account may have been a best buy when you took
it out, but that doesn't mean it's competitive now. Many
accounts launch with eye catching rates but gradually let
that slide over time. Loyal savers lose out, so shop around.
The same goes for savings accounts.
Visit: www.moneyfacts.co.uk or www.moneysupermarket.com
Use your tax allowances
Most people don't consider the tax implications when deciding
where to put their savings, but this could cost you dear.
Pay as little tax on your savings as possible by using
your ISA allowance, particularly the £3,000 cash
element, or other tax efficient vehicles such as National
Savings.
Couples should carefully juggle their personal allowances.
If one partner is in a lower tax bracket, transferring savings
into their name should save you tax.
If you're a non-taxpayer, make sure you don't pay tax by
mistake. Complete Inland Revenue form R85, available from
your bank or building society, to reclaim any tax automatically
deducted from your savings.
Downsize your property
The greatest asset you are likely to own is also the trickiest
to dip into — the equity in your property.
The UK's seven million retired homeowners are sitting on
equity worth more than £700 billion, yet many have
large debts and are using credit cards, personal loans and
hire purchase to meet everyday spending.
Growing numbers of older people plan to use their property
to fund their retirement, either by moving abroad, signing
up to an equity release scheme (see page 32), or selling
up and moving to a smaller property or cheaper area.
You won't just get a tax-free cash lump sum by moving, you'll
also have lower heating and lighting bills, and should pay
less Council Tax.
CASE STUDY
Bill and June Hammond funded the perfect retirement by
downsizing from their four-bedroom family home to a two-bedroom
seafront apartment in Rhyl. North Wales.
After 23 years as a midwife, June, 58, took early redundancy
last year, and publican Bill, 62, took early retirement soon
after.
They sold their home in Prestatyn, North Wales, where they
had lived for 32 years, for.1181, 000. In June 2004, they
moved into a £95, 000 apartment in a purpose-built
complex for the over 55s. "We're in a perfect location,
yards from the promenade, just minutes' walk from the town
centre. It feels like we're on holiday every day," June
says.
They have put their profit into a low risk deposit account
and are living off the interest and other savings until they
can draw their basic state pensions.
Moving to a smaller property has also cut their household
bills. "Heating, lighting, water rates, Council Tax
have all dropped dramatically. We do pay a £12 -a-week
maintenance cost for the apartment, but that covers all repairs,
including gardening costs and window cleaning."
Their spending on petrol has also fallen. because they now
live much closer to the shops and local amenities. "We
still have a spare room so that our daughter Anna can visit
us at the seaside at weekends. Life is good, this is how
retirement should be. " June says.
Slash power bills
One drawback with spending more time at home is that your
heating and lighting bills can shoot up, so make sure you
choose the most competitive supplier. Industry watchdog
Ofgem says you can save up to £200 a year on gas
and electricity.
Switching suppliers is relatively straightforward, but it
isn't the only way to cut your utility bills. You could switch
to energy-efficient lightbulbs, install a more efficient
heating system and insulate your loft and walls, and you
may be able to get a government grant.
Age Concern Energy Services
Tel: 0800 015 2372
Ofgem
Tel: 0800 279 4546
website: www.energyhelpline.com
Simply Switch
Tel: 0800 781 9693
website: www.unravelit.com
The Energy Shop
www.TheEnergyShop.com
Don't let assets go to waste
£
15 billion is lying in forgotten bank accounts, insurance
policies, share certificates, company pension schemes, National
Savings and Premium Bonds, according to the Unclaimed Assets
Register. And that's £268 for every man, woman and
child in the UK.
Assets can be lost when people move house, lose the paperwork
or die without telling relatives where it is kept. The money
is still yours so start by contacting the relevant bank,
insurer and investment company, or your former employer.
The Unclaimed Assets Register charges £18 to search
for unclaimed life, pensions, dividends and unit trusts,
and £35 for an occupational pension.
Tel: 0870 241 1713
website: www.uarco.uk.
British Bankers Association will trace dormant bank accounts
at 45 UK banks free of charge.
Tel: 020 7216 8909
website: www.bba.org.uk
The Building Societies Association will trace dormant accounts
free at 67 existing societies plus those that have merged
or converted since 1937.
Tel: 020 7437 0655
website: www.bsa.org.uk
The following may help with lost occupational and personal
pensions:
The Pension Schemes Registry
Tel: 0191 225 6316
website: www.opra.gov.uk
The Pensions Advisory Service
Tel: 0845 601 2923
website: www.opas.org.uk
TAKE NOTE
Cut back on spending.
Britons now owe £1 trillion, make sure your debt isn't
out of hand.
Make sure you're getting good value. Downsizing to a smaller
property can be a great way of raising funds. Don't lose
track of assets.
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