FIFTY is the new 40; 40 is the new 30.
But why this dread of reaching the half century? Does life not begin at 50?
As you pass the golden year, your income position is likely to become healthier than ever before. You can also expect to benefit from a reduction in your car insurance.
It is a fact that drivers aged under 50 are 31 per cent more likely to make a claim on their car insurance than those over that threshold: that is reflected in a reduced annual premium. Your beloved children will have likely flown the nest and be starting to stand on their own two feet which will save you a fortune.
So, it isn’t as depressing as some would have us think. Despite the likelihood of higher retirement ages and the fear of living on a pension, there are some rays of sunshine you should keep in mind.
Hopefully, mortgages, which have been a burden on your income for many years, will be approaching full repayment or, in fact, be gone. With such pressures on finances removed, many over-50s will find themselves in a much more comfortable position with regard to income, as their expenditure becomes far more focused on the enjoyment of life.
It is inevitable that turning 50 will prompt initial thoughts of retirement and how your pension will fund your life after work. There is so much more to think about with the options available today.
Gone are the days when the only option was the purchase of an annuity, which would provide a fixed or escalating income for life.
A-Day, which came into force from 6 April, brought the potential to draw an income from a personal pension fund without ever having to purchase an annuity.
Moreover, we now have the peace of mind that it is likely the fund will be able to be passed to children’s pension funds, albeit less a 40 per cent inheritance tax charge.
The other bonus signalled by reaching a half century is the prospect of being able to release a lump sum of up to 25 per cent of your pension fund, but with no requirement to take an income unless you want to (from 2010 the minimum age for this release becomes 55). Perhaps the dream of paying off the mortgage early and starting to enjoy the extra income is not as far away as we thought.
In short, turning 50 clearly does have benefits, although being smart about it is crucial: you can look forward to improved car insurance premiums, recent growth in the equity markets swelling your pension fund and the potential to take retirement benefits in a more flexible manner than ever before.
Spare a thought for citizens of Turkmenistan. The retirement age in the ex-Soviet country is 62 for men and 57 for women. Unfortunately, life expectancy is about five years less than these ages, so living long enough to collect a pension is something of a triumph of retirement planning in itself.
AS LIABILITIES decrease and assets rise, inheritance tax (IHT) will undoubtedly become a concern. Scottish Widows estimates that one in three households now face the 40 per cent bill. While issues around pension planning generate extensive column inches, it is imperative that IHT planning be put at the forefront of everyone’s agenda.
It is worrying that so few people ensure their will has been properly constructed to utilise as much nil rate band (£285,000 for 2006-7) on first death, for a married couple, as possible.
It’s frustrating, too, that still worryingly low numbers are using their annual gift allowances, which allow you to gift funds on with no charge to IHT. Chancellor Gordon Brown has narrowed the ways in which gifts can be made in an IHT-friendly manner, making a topic few like to address even more challenging.
Make full use of gift allowances It seems that not only life, but IHT planning should start at 50.
