The idea behind seeking financial advice is to ensure your investments, pensions and protection are right for your needs and circumstances. There are many different ways that you can benefit from Mark and Matt’s advice, such as:
Return on Investment
They can review your needs and circumstances and ensure your invest accordingly.
Ensuring you will have enough income in later life (e.g. pension planning).
Peace of Mind
Knowing you have made the best practical choices and obtained the best deals the market has to offer you.
Making sure you and your family have safeguards in place against unfortunate circumstances (e.g. illness, job loss, premature death).
Overcoming challenges and reaching milestones.
Reducing the risk of making financial decisions you regret, or falling victim to fraud.
Discovering new and unexpected ways to make your money work harder for you.
Divorcees twice as likely to have no savings
A daunting part of separation or divorce for most couples is sorting out the finances. Financial Disputes can be a major stumbling block in the divorce process and could take longer than the divorce itself.
This is the business side of divorce, and it may be the most important financial event of your life. The choices and decisions that you make will have an important influence on your financial well-being for many years to come. Divorced or separated people are twice as likely to have no savings or investments compared with those who are married (32% vs. 14%), according to research by Zurich UK.
Post-divorce Financial Considerations
1. Create A New Budget
With your household income being impacted, it’s essential to go through your finances. Creating a budget sheet will help you to keep track of your incomings and outgoings. It will also help you to spot where you can make cutbacks. If you’re unsure about how to get started, there are many tools available online to help.
2. Protect Your Credit Score
You’ll be surprised at how many financial products and agreements you share with your ex-partner, from utility bills to mortgage repayments and credit cards, so it’s worth checking your credit record. Your credit report will list the details of every financial agreement you have. This will help protect your credit score from anomalous payments on the part of your former spouse.
3. Close Joint Accounts and Open New Ones In Your Name
It’s really important to make sure that all joint credit cards and accounts are closed, paid off in full or at the very least changed to either your name or your former partner’s. Not doing so could mean them being able to use your accounts, run up debt or use your savings.
This could have a negative impact on your future. Going forward, make sure you open any accounts solely in your name.
4. Think About Your Pension
If you’ve just been through, or are currently going through, a divorce or separation, your pension is probably the last thing on your mind, but it’s essential for your future that you plan ahead – your future could depend on it. You and your partner may have built up a strong pension pot, so it’s important to pay particular attention to how this is divided, to make sure you are getting the best outcome. It’s particularly important for women who may depend on their husband’s provisions for their retirement, as they could be in for a nasty shock.
5. Don't Forget About Your Protection Needs
If you already have life cover in place in the form of a joint policy, make sure you check the policy terms. Some include a ‘Joint Life Separation Option’, which means that the contract can be amended to cover both parties individually. Many policies also contain options that allow you to increase the amount of cover you have following life events, including divorce or separation, without needing further underwriting. You may want to consider increasing your cover if you have had to take on a new or larger mortgage or other debts.
6. Make The Most Of Your Protection Cover
Once you have changed your policy to protect you individually, it’s worth making use of any support that is offered. Many protection policies contain valuable support or counselling benefits that can provide vital help or advice if you are going through a divorce. This support can cover areas from financial to legal to emotional support. Protection can also play a key role in covering any maintenance liabilities for an agreed period, such as when children reach 18, in the event of severe illness or even death.
7. Update Your Will
Now that you are divorced or separated, your existing Will is unlikely to be appropriate to your new circumstances. Make sure you update this as soon as possible to ensure that your wishes are followed.
Taking A Long-Term View
Divorce can be an incredibly challenging time, both emotionally and financially. Understandably, the focus is naturally on splitting immediate assets, but it’s important that the long-term is also part of the planning. In fact, after the family home, a pension can actually be the biggest asset at stake, so protecting this in the first instance is crucial.
All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,073 adults. Fieldwork was undertaken between 25 and 26 October 2016. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+). 900 adult participants (19–55+) who are representative of the general population took part in the Mindlab experiment in the UK from 25–26 October 2016.
Millions of workers across the UK could be heading for a significant shortfall in the amount of pension they need for an adequate income. The World Economic Forum (WEF) has issued a warning that calls on the government to impose faster pension-age rises as it earmarks the UK as one of several countries facing a 'pension time bomb', with the UK pension savings gap reaching £25 trillion by 2050 if action is not taken soon.
The pension savings gap is defined as the shortfall between current retirement
pots and the amount of money needed to maintain an income of 70% of pre-retirement
levels. Commenting, the WEF head of financial and infrastructure systems, Michael Drexler,
said: ‘The anticipated increase in longevity and resulting ageing populations is the financial
equivalent of climate change.
‘If increases in life expectancy were matched by corresponding increases in the retirement
age, the challenge would be less acute.’ He added that policymakers need to consider how to integrate 75 and 80-year-olds into the workplace. The WEF analysis also calls for the £1 million lifetime allowance to be scrapped, arguing it
sends the ‘wrong signal’ that there is a limit to pension contributions.
State Funding Expectations
A study by the Organisation for Economic Cooperation and Development (OECD) in 2015
found that savers in the UK could, on average, expect the state to fund 38% of their workingage
income when they retired – lower than any other major advanced economy. Across
the 35 major economies in the OECD, the average was 63%.
While the think tank has praised the UK Government’s shake-up of the pensions system, many are still not saving enough into private pension schemes, the OECD warned.
The WEF said a five-point plan was needed to ensure those born today can retire and
still receive a comfortable income. They also noted that life expectancy has been increasing
‘rapidly’ since the middle of the last century, rising on average by one year, every five years.
This means that babies born today can expect to live for more than 100 years.
According to the forum, the number of people aged over 65 will increase from 600 million
today to 2.1 billion in 2050.
Public Purse Pressure
As population growth slows, this will mean the number of workers paying for the pensions of
those in retirement will fall from eight workers today to four per retiree in 2050, putting
pressure on the public purse.
The WEF believes working for longer is inevitable. George Osborne, the former
Chancellor, linked the State Pension age to life expectancy in the previous
parliament. As a result, the Office for Budget Responsibility (OBR), the Government’s fiscal
watchdog, forecasts that workers will have to retire at 69 by 2055.
Under current plans in the UK, the State Pension age will rise to 66 by 2020 for both
men and women.
The OBR’s latest long-term projections suggest this move is necessary for the State Pension to
remain sustainable. Official projections show 26.2% of the UK population will be aged over
65 in 2066, compared with 18% last year and 12% in 1961.
The WEF believes workers need to save between 10% and 15% of their average annual
salary to support a reasonable level of income in retirement. It warned that many workers
faced a shock in later life, with current savings rates ‘not aligned with individuals’ expectations
for retirement income – putting at risk the credibility of the whole pension system.’
When Would You like To Retire?
As people’s retirements get longer, the responsibility for funding them will shift even further towards individuals. If you have not retired but have a specific retirement date in mind, it is essential to obtain professional financial advice to put a savings plan in place to aim to meet that goal with sufficient savings in your pension pot. To discuss your requirements, please contact us.