Financial Planning

How creating a care fund could provide you with essential protection later in life

Rising life expectancy is good news but it could present some challenges, including making provisions for potentially needing additional help later in life. An Age UK report has highlighted how many people have unmet care needs and the lack of financial support from local authorities. So, if you haven’t already, creating a care fund as part of your financial plan could offer you valuable protection later in life.

A care fund is simply a pot of money that’s set aside to cover expenses related to care. That might include paying someone to come into your home to help with day-to-day tasks or moving into a residential care home. You might hold this money in a savings account, earmark a portion of your pension for it, or have investments you could sell if necessary.

A care fund could offer you peace of mind and more options if you find you need care later in life.

2 million over-65s have unmet care and support needs

According to the Age UK report, the number of people in the UK aged 50 and over is increasing rapidly.

As of 2024, there are 22 million people aged 50 and over in England alone. This figure is expected to rise by almost 20% over the next two decades – the equivalent of 4.3 million people. This is likely to mean more people have care needs and place pressure on a system that is already stretched.

Indeed, Age UK estimates there are already around 2 million people aged over 65 who have unmet care needs.

The survey asked people aged over 65 about the challenges they face. The participants said they struggle to:

• Dress (10%)
• Get in and out of bed (6%)
• Bathe (6%)
• Walk across a room (5%)
• Go to the toilet (4%)
• Eat (1%).

A large number of those who reported needing help with these everyday tasks aren’t receiving the support they need. There are many reasons why this may be, but, for some, finances could play a role.

The report found that the number of people aged over 75 in England has grown by around a fifth between 2013 and 2024. Yet, despite this, fewer older people are receiving local authority long-term care.

Indeed, most people will need to pay for at least a proportion of care costs themselves.

In the 2024/25 tax year, in England and Northern Ireland, if you have savings and assets of more than £14,250, you will need to pay for some of your care fees. If the value of your assets exceeds £23,250, you will need to pay for all your care fees.

The thresholds for paying for care are different in Scotland and Wales.

So, in most cases, you’ll need to pay for some of the costs associated with care., which can be substantial. According to figures from carehome.co.uk, the average cost of a residential care home for a year is more than £60,000. If nursing is required, it could rise to more than £73,000 a year.

Even if you’re able to live independently, the cost of having someone visit to provide a helping hand with some everyday tasks can add up. The rate varies across the country, but the average is around £18 an hour. Just 10 hours a week at the average rate would add up to more than £9,000 a year.

Setting aside some money for care could mean you don’t have to worry about finances if you find you’d benefit from help. It might mean you don’t face a delay when you need to access services.

A care fund could help you create the lifestyle you want

A care fund isn’t just about paying for the cost of care either, it may also provide you with more freedom for creating the lifestyle you want.

With money set aside, you might have more options when selecting the care services, you need.

For example, you might want to choose a care home that’s close to your children so they’re able to visit or one that has facilities that will allow you to continue your hobbies. Alternatively, you may prefer to stay in your own home and pay for a live-in carer to provide daily support or be able to supplement a loved one’s income so they’re able to reduce their working hours to care for you.

It can be difficult to think about what you’d like to happen if you needed help or couldn’t live independently. Yet, weighing up the options now could mean you’re in a better position to make decisions should you need to.

Making your care fund part of your estate plan

Setting up a care fund could be an important way to protect you if you need help later in life. But, of course, you hope you won’t need it.

So, it’s worth thinking about what you’d like to happen to your care fund if it remains untouched. You might want to pass it on to family members through a will, make a charitable donation, or make gifts to loved ones during your later years. Making your care fund part of your estate plan could ensure that it’s distributed in line with your wishes.

Contact us to discuss how to manage potential care costs

We’re here to help you create a financial plan that gives you confidence in your financial future, including if you need care or support later in life. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

Investment market update: October 2024

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5 reassuring ways a financial plan could help you deal with life’s scares

Halloween is just around the corner, but there’s more than ghouls and ghosts to be scared of. Sometimes, daily life can be just as frightful as the latest horror film.

Here are five reassuring ways a financial plan could help you next time you encounter one of life’s scares.

1. A financial plan could help you build financial resilience to overcome obstacles

Even the best-laid plans can be knocked off course by events outside of your control. Dealing with obstacles like long-term illness or losing your job can be scary, especially if low financial resilience means you’re also facing additional pressure.

For example, if you’re diagnosed with a serious illness, you may want to focus on your recovery, spending time with your loved ones, or adapting to a new lifestyle. But if your income has stopped and you don’t have a plan in place, you could find you’re more worried about how to meet bills or support your family.

So, as part of your financial plan, we’ll work with you to assess your financial resilience and the steps you might take to improve it.

Depending on your circumstances, that could include building an emergency fund, taking out appropriate financial protection, and assessing how you might use your other assets to provide a regular income if necessary.

A financial plan can’t remove unexpected obstacles, but it could provide you with a way to overcome them and mean they’re less scary to face.

2. A financial plan could help you prepare for the future

Effective financial planning often involves considering the future. In some cases, you might need to consider what you want your life to look like in several decades.

It can be exciting to set out your life goals, but, at the same time, it may be frightening too. There might be many different factors you need to weigh up and, for some goals, the steps you need to take to achieve them can seem impossible.

Take retirement planning, for example. The figure you want to save into your pension to secure the retirement you want may seem dauntingly high. Even as you near the milestone, you might still have retirement worries. Indeed, according to a report in IFA Magazine, almost half of pension savers are worried they won’t have enough to last their lifetime.

A financial plan could help you prepare for the future and break down large goals so you can see how to reach them.

3. A financial plan could provide answers to questions that keep you up at night

It’s not just the memories of a horror film that might keep you up at night, wondering “what if?” could be just as harmful to your wellbeing.

Dealing with uncertainty can be terrifying. If you’re kept up at night by wondering what would happen in different scenarios, a financial plan could offer some reassurance.

A financial plan doesn’t just consider how your finances will change if everything goes according to plan. It also looks at how factors outside of your control could affect your wealth and lifestyle. As a result, it could help you answer the questions you’re worried about.

You might want to understand:

• If your partner and children would be financially secure if you passed away
• Whether you could afford the cost of care if you needed support later in life
• How your finances would be affected if you’re no longer able to work due to an illness
• If your retirement would still be secure if investments underperformed or the pace of inflation increased.

Often “what if” scenarios are scary because of the unknown. It’s impossible to know what’s around the corner, but we could help you understand the potential impact and then take steps to keep your long-term plans on track.

4. A financial plan could help you tackle conversations you’re dreading

There might be times when you need to have a difficult conversation with your loved ones about your finances or long-term plans. For some, the nerves around talking about certain subjects could lead to anxiety or putting them off altogether.

Indeed, according to a Canada Life survey, 5.1 million UK adults who received an inheritance in the last five years did not discuss the value of it with the benefactor beforehand.

It’s easy to see why some benefactors choose not to discuss inheritances. Talking about passing away may be difficult or they might not feel comfortable divulging the value of their estate. However, doing so could help beneficiaries better manage an inheritance when they receive it.

Other difficult conversations could include how you’d like someone to handle your affairs if they become your Power of Attorney or your preferences for a funeral.

Setting out your goals and taking steps to improve your financial wellbeing could mean you feel more confident tackling difficult conversations around money and your life.

In some cases, you might decide to have your financial planner be part of the conversation too. Having a third party who understands the financial aspect could help you all get on the same page.

5. You’ll have someone to turn to for support

By working with a financial planner, you don’t have to tackle life’s scares alone – you’ll have someone to turn to who understands your goals, worries, and financial circumstances. Knowing that a professional has reviewed your plan and is there to answer questions could make the intimidating far less daunting.

If you’d like to arrange a meeting to talk about your aspirations and worries, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Two-thirds of UK adults don’t have a will. Here’s how it could affect your legacy

Failing to set out your wishes in a will could mean your assets aren’t passed on to the loved ones you’d like to benefit from your estate. As a result, this could have a significant effect on your legacy.

A will is one of the main ways to ensure your assets are passed on to your loved ones according to your wishes. So, if you don’t have a will in place, what will happen?

Intestacy rules are applied if you pass away without a will

If you pass away without a valid will, also known as “intestate”, the way your estate will be distributed will follow strict rules, which could be very different from your wishes.

In England and Wales, if you’re married with no children, everything will go to your spouse or civil partner. If you’re married with children, your spouse or civil partner will inherit:

• Your personal possessions
• The first £322,000 of your estate, and
• Half of your remaining estate, with the other half being shared equally among your children.

If you’re not married and have children, your entire estate would be divided equally between your children.

If you’re not married and don’t have any children, your estate would be shared equally among one of the following groups of people in this order:

• Parents
• Siblings, or nieces or nephews if your siblings have passed away
• Grandparents
• Aunts and uncles.

Finally, if no living relative can be found, your estate will pass to the Crown. Most of these funds go to the Treasury. According to the BBC, as of November 2023, there were more than 6,000 people on the government’s list of unclaimed estates.

As you can see, intestacy rules might mean some family members or friends who you’d like to benefit from your estate are overlooked. It’s not just about wealth either, as you may have sentimental items you want to go to a particular person. Perhaps you’d like your granddaughter to inherit your jewellery, or pass on your record collection to a music-loving nephew.

Intestacy rules also don’t consider whether you’d like a portion of your estate to go to organisations or charities you might wish to support.

By not writing a will, you’re missing out on an opportunity to set out exactly who you’d like to benefit from your estate.

Despite this potential impact on your legacy, research from the IRN Legal Wills and Probate Consumer report suggests just 36% of UK adults have a will.

5 other practical reasons to write your will

Ensuring your assets are passed on to your intended beneficiaries isn’t the only reason to prioritise writing a will if you haven’t already. Here are five other practical reasons.

1. Name a guardian for your children

If you have children under the age of 18 or other dependants, you can use your will to name their appointed guardians if the worst should happen and you pass away. A guardian would take full responsibility for your children until they reach adulthood. If you have not named a guardian, the court will appoint one, who may not be the person you’d choose.

2. Set out your funeral wishes

While funeral wishes listed in a will aren’t legally binding, they can be very useful for your loved ones. Organising a funeral while grieving and putting affairs in order can be stressful, and your family may worry about making the “wrong” decision. Making a note of your preferences could provide much-appreciated guidance.

You might also decide to set money aside to pay for your funeral in your will too.

3. Potentially reduce an Inheritance Tax bill

If your estate exceeds the nil-rate band, which is £325,000 in 2024/25, it could be liable for Inheritance Tax (IHT). In some cases, your will could be used to potentially reduce the bill.

For example, if you leave your main home to your children or grandchildren, you’ll usually be able to use the additional residence nil-rate band, which in 2024/25 could increase the amount you can pass on before IHT is due by £175,000.

There are often other ways you can reduce an IHT bill. If you’d like to discuss estate planning that considers IHT, please contact us.

4. List the executor of your will

An executor is responsible for carrying out the instructions in your will and handling your estate. It can be a time-consuming task, and one that some loved ones may find difficult. So, you might want to take some time to consider who would be suited to the role and name them as the executor in your will.

You can choose a family member or friend to be an executor. Alternatively, you may appoint a professional executor, such as a solicitor or accountant, which could be especially useful if your estate is large or complex.

5. State who you’d like to care for your pets

If you have pets, you can use your will to set out your wishes regarding their care, including who will look after them. While you can’t leave assets directly to your pets, you might want to set aside some money for the person who will care for them to cover the costs.

Understanding your estate could be valuable when you’re writing a will

If you need to write a will, understanding your estate could be a valuable place to start. Considering your assets and how the value of them might change during your lifetime could affect how you wish to pass them on.

Please get in touch to talk about your estate plan, from what you want to include in your will to how to mitigate a potential IHT bill.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, or will writing.

78% of retirees could be missing out on investment returns by accessing their pension early

According to research from Scottish Widows, more than three-quarters of retirees could be missing out on potential investment returns by accessing their pension before their retirement date. Understanding the implications of withdrawing money from your pension could help you to make a decision that’s right for you.

Read on to find out some of the areas you might want to consider before you access your pension for the first time.

You can usually access your pension at 55

Usually, you can withdraw money from your pension when you turn 55 (rising to 57 in 2028). For many people, that will be before their planned retirement date.

It can be tempting to access a portion of your retirement savings at this point, even if retirement is some way off. Indeed, the Scottish Widows survey found that 78% of people withdraw some money from their pension before they retire – 52% take funds five years before their retirement date and 21% withdraw money 9 to 10 years before.

On average, those accessing retirement savings while they’re still working withdraw £47,000.

There are lots of reasons why you might decide to access your savings before you give up work completely. Perhaps you plan to phase into retirement by reducing your working hours and are using a pension withdrawal to supplement your income. Or you might use the money to reach life goals, such as paying off your mortgage or taking a once-in-a-lifetime holiday.

However, taking money from your pension before you retire could affect your lifestyle once you give up work. So, it’s often important to consider the long-term impact. When you factor in investment returns, the effect could be greater than you expect.

Accessing your pension early could reduce its value by thousands of pounds

Typically, money held in your pension is invested. This provides an opportunity for it to grow over the long term. As a result, withdrawing funds from your pension early could mean its value is lower than you expect.

Scottish Widows calculates that if you withdrew £47,000:

• Five years before your retirement date, you could miss out on £13,925 of investment returns
• 10 years before you retire, investment returns could be £24,661 lower.

The figures assume investment returns of around 5%, which cannot be guaranteed. However, the data highlights the potential impact of withdrawing money from your pension sooner than planned.

So, when you’re weighing up the pros and cons of taking money from your pension, you may want to consider how lower investment returns could affect your income in retirement.

A financial plan could help you assess the effect of making a pension withdrawal

While withdrawing money from your pension before you retire could mean you miss out on investment returns, that doesn’t automatically mean it’s the “wrong” decision.

For instance, if you use the money to pay off outstanding debt, such as your mortgage, it could take a weight off your mind and improve your financial situation in the short and long term.

Alternatively, you might have enough to increase your disposable income to spend on experiences now without risking your financial security later in life.

What’s important is that you understand the potential implications of accessing your pension sooner, and if it’s the right decision for you. It can be difficult to assess as you might need to consider a whole host of factors, some of which are outside of your control.

If you want to understand how taking a lump sum or regular income from your pension could affect your long-term finances, you may want to consider:

• Life expectancy
• Future income needs
• Potential care costs
• How inflation could affect outgoings
• Your ability to overcome financial shocks.

A financial plan and using tools, such as cashflow modelling, could help you understand how your decisions now could affect your future.

You might also want to look at other assets as well – could your savings or other investments be used to help you reach your goals instead of accessing your pension? A complete financial review may help you assess how to use your assets and wealth to balance short- and long-term goals.

Contact us if you’re considering accessing your pension before your retirement date

If you’re thinking about accessing your pension before your planned retirement date, we could help you assess the long-term implications. It could mean you have the information you need to understand which option could be right for you. Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Investment market update: January 2023