Whilst none of us can predict what the future holds, shoring up your finances now can help ensure you’re as prepared as possible for whatever lies ahead.
One of the best ways to do this is by giving yourself a money MOT – reviewing every aspect of your finances so that you can be certain your money is working as hard as it possibly can for you.
This is more important than ever right now, given the impact that rising living costs are having on our finances. Millions of people are struggling to make ends meet, with those approaching retirement often wondering whether they’ll need to work for longer.
If you’re worried about your finances, or feel you have a jumble of accounts and policies that you’re not sure are still appropriate for you, here’s how to get back on track.
Review your retirement goals
Most of us have a rough idea of when we’d like to stop work, but it’s often hard to know when we’ll have built up sufficient pension savings to retire.
Jon Greer, head of retirement policy at Quilter, said: “The cost-of-living crisis will stretch finances in a way many have not experienced before. People may choose to opt out of funding their retirement in a bid to have more money in their pocket today. Although this is understandable, saving for your retirement should be one of the last things you stop doing if money is tight and reducing day to day spending, if possible, should be adopted before any potentially catastrophic financial decisions which will impact retirement are made.”
If you’re keen to maintain your pension payments, or are looking to save a bit more for the future, our article on How to save money has plenty of ways you might be able to reduce your outgoings so you can boost your savings. You might also want to look at ways you could perhaps phase your retirement rather than stopping work abruptly. Find out more in our article How can I phase my retirement?
Understand how much you’ll need in retirement
If you do have to reduce your pension payments temporarily, it’s worth having a rough idea of how much you’ll need to live on in retirement and what impact this will have on your income when you stop work. Our article How much should I save for retirement? can help you work out what you should ideally be saving each month.
Given these uncertain times, It’s also worth thinking about how you’d cope financially if you have to retire early. Find out more in our article How can I manage the financial impact of early retirement.
Check your State Pension entitlement
Remember to factor in the State Pension which is currently £203.85 a week in the 2023/24 tax year (£10,600.20 per year) based on 35 years of National Insurance Contributions.
If you don’t have enough qualifying years of National Insurance contributions, you’ll get an amount based on the number of years you have paid in, unless you’ve got less than 10 years of contributions, in which case you won’t normally qualify for any State Pension.
It’s worth knowing that if you provide childcare for your grandchildren and you don’t have the full 35 years of National Insurance contributions, you might be able to boost this through the government’s Specified Adult Childcare’ credits scheme. You can learn more about this in our article Caring for grandchildren: how it can help you boost your State Pension.
Track down lost pensions
It’s worth checking whether you might have any pensions you’ve lost track of which could boost your retirement savings. Find out how to do this in our guide to Tracing lost pensions.
If you’re not sure what to do with your pensions once you’ve found them there are many reputable companies and advisors who can help you decide whether to combine your pensions or transfer to a different scheme. However, it’s always sensible to be on the lookout for potential pension scams, and high charges.
Always make sure that any advisor or company you plan to use to help you with your pension is regulated by the FCA, which you can check here.
Review where your pension is invested
You should also review where your retirement savings are invested. You’ll usually be able to choose from cautious, balanced or more adventurous options, so you can find a fund which matches your appetite for risk. Remember to take charges into account too, as the higher they are, the more they’ll eat into your investment returns. You can find out more in our articles Where is my pension invested? and What pension charges am I paying?
If you want personal recommendations about where to invest your retirement savings, you’ll need to seek professional financial advice. This will come at a cost but you may be able to take some money from your pension to pay for it through the Pension Advice Allowance.
This allows you to take up to £500 from your defined contribution pension up to three times in your lifetime to put towards the cost of retirement financial advice. You can find out more about how the Pension Advice Allowance works in our article What is the Pensions Advice Allowance?
If you’re considering getting professional financial advice, Aviva is offering Rest Less members a free initial consultation with an expert to chat about your financial situation and goals. There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
Think about your options at retirement
If you’re close to retirement, start thinking about how you’ll use your pension pot to provide you with an income. For example, you might want to use drawdown, where your pension stays invested, either with your current pension provider or another provider, and you take money from it as and when you need it. You can find out more about drawdown in our article What is pension drawdown and how does it work?
Alternatively, you might decide to opt for an annuity, which is a type of contract with an insurance company which will provide you with an income for life, or you might decide to go for a combination of these. Learn more about annuities in our guide Annuities explained and find out how these compare to other retirement options in our article Your pension options at retirement.
If you’re 50 or over and have a defined contribution pension, you can get free guidance on the options available to you from the Government’s Pension Wise service. However, if you want advice about your specific circumstances, you’ll need to seek professional financial advice.
Whichever option you choose, you can usually take a 25% tax-free lump sum from your pension once you reach the age of 55. However, there are several things to consider if you’re thinking about doing this before you retire, not least the more you take out of your pension now, the less you’ll have to live on later. Find out more in our article Should I take my tax-free cash at 55?
Look at ways you can reduce your outgoings
Explore ways you might be able to trim your other outgoings, perhaps so that you can use any money you save to top up your pension, or help build a cash buffer.
There are several ways you might be able to cut costs, including:
Review your broadband deal
Data from Ofcom, the regulator for the telecoms industry, shows that around 40% of broadband customers, equivalent to around 8.8m households, are out of contract, and potentially able to make savings averaging £100 a year by signing up to a new deal. You can compare broadband deals using this broadband comparison tool.
Get a water meter
If you haven’t already got one, and depending on the number of people living in your property, installing a water meter might help you cut costs. The Consumer Council for Water has a helpful water meter calculator to help you work out whether you could save money by moving to a meter. Learn more about cutting water bills in our article How to reduce your water bills.
Don't automatically renew your car and home insurance
Although insurance rules changed in January 2022 to ensure loyal customers don’t pay more for their premiums than new customers, it’s still worth shopping around for cover. If your insurance renewal is coming up soon, you can compare car insurance quotes or home insurance quotes today, or if your insurance isn’t up for renewal just yet, let us know your renewal month here and we can send you a reminder nearer the time.
Keep an eye on your mobile bills
Use a mobile comparison service, to compare the best SIM-only deals and handset deals in the market. Mobile costs are not something that many of us regularly scrutinise so if you’re out of contract with your existing provider, you might be surprised at how much you could save.
Check out our article How to save money – 21 money saving tips for plenty more ideas for reducing bills.
Take charge of your debts
Do you know how much interest you’re paying on your credit card debts or personal loans? If the answer is no, you should get in touch with your lenders and find out how much you’re being charged.
Once you’ve done this, try to focus on paying off your most expensive debts first, and look at ways you might be able to reduce the amount of interest you’re paying.
For example, balance transfer cards offered by Barclaycard and M&S Bank charge 0% interest on credit card balances transferred across to them for up to 29 months and 28 months respectively, enabling you to repay what you owe without paying interest on top. Remember to factor in balance transfer charges though – Barclaycard charges up to 3.45%, and M&S Bank charges up to 2.99%. You’ll need to be certain you can clear what you owe within the interest-free period too, as interest charges will shoot up when it ends.
If you have several different debts you’re paying high rates of interest on, another option you might want to look at is remortgaging to consolidate your debts. Remember, however, that by consolidating, what used to be unsecured debt is now debt secured against your property so if you are unable to make repayments, your home could be at risk. Also, if you are spreading the repayments over a much longer period, even on a lower interest rate, it may ultimately cost you more in interest, unless you make mortgage overpayments. Learn more about managing your debts in our guide How to take control of your debts.
Check your mortgage
Mortgage rates have risen sharply in recent months, following 14 consecutive increases in the Bank of England base rate in a bid to curb runaway inflation.
Lots of people stick on their lender’s standard variable rate (SVR) after rolling over onto it after their initial mortgage rate finishes, but with some SVRs now higher than an eye-watering 9%, might be able to trim hundreds, if not thousands of pounds, off their annual costs by remortgaging to a cheaper deal. However, bear in mind you’re still likely to be paying much more than you were on your previous deal. Find out how to manage steeper costs in our guide Eight ways to manage higher mortgage payments.
According to Rest Less research, worryingly those aged over 50 are much more likely to be on their mortgage lender’s SVR than other age groups. One in three (35%) of those questioned aged 50 and over said they were paying their lender’s SVR, compared to just one in five (20%) of those aged under 50.
Someone with a £150,000 repayment mortgage with 15 years left to run who is borrowing 60% of their property value would be paying £1,449 a month if they were on the typical SVR of 8.18%. Their monthly payments would fall to £1,185 a month if they remortgaged to a best buy two-year fixed mortgage rate of 4.99% – a saving of £264 a month or £3,168 a year.
If your mortgage deal is coming to an end soon, or if you’re on your lender’s standard variable rate, then you can compare mortgage rates from the whole of the market using this Mortgage comparison service. You might be surprised at how much you could save. Alternatively, if your mortgage has several months or years to run, you can set a mortgage reminder here and we’ll email you nearer the time.
You can find out more about your mortgage options, and how they can vary depending on your age, in our articles Mortgages for over 50s: What you need to know and Mortgages for over 60s: what you need to know.
Another option worth considering if you have a decent amount of savings in place is making mortgage overpayments so you can reduce the overall amount of interest you pay and clear your mortgage sooner.
For example, if you have the same £150,000 repayment mortgage with 15 years left to run and are paying an interest rate of 4.99%, you could knock 10 months off your mortgage term and save £4,090 in interest if you made monthly overpayments of £50. This rises to 1 year and seven months off your term and £7,680 less in interest if you made £100 monthly overpayments. Most lenders allow you to repay 10% of your mortgage balance penalty-free every year, but you should check with your lender before doing so to ensure you won’t incur any early repayment charges.
If your lender won’t allow overpayments and you’re struggling to remortgage, find out what help is available in our article What help is there for mortgage prisoners?
Review your protection policies
By the time we reach our fifties, sixties and beyond, many of us have a mish mash of protection policies, which might include various life insurance policies taken out each time you’ve taken out a mortgage.
It’s worth checking exactly how much cover you have in place, and whether it’s enough to provide your loved ones with financial security when you die. The amount of life insurance you’ll need depends on your circumstances and what you want to achieve.
A good starting point is to think about how much cash you’d need to pay off any debts that you might leave behind when you die. You should also think about how much money your dependents might need to feel financially secure if you’re no longer around to provide an income. Find out more about life cover in our article Why life insurance matters.
It’s also important to review any other forms of protection you might have, such as accident, sickness and unemployment cover, that could prove useful if you lose your job.
As with any type of insurance, always shop around before you purchase a policy. If you have any pre-existing medical conditions it can be helpful to use a fee free specialist life insurance broker to help you navigate the various acceptance criteria and find the right insurance cover for you.
There are a number of fee free brokers available in the market, but if you’re looking for somewhere to start, you can get fee-free advice from a Rest Less life insurance expert. All you need to do is book a no-obligation call to get personalised fee-free advice and quotes from the whole market.
Make your savings work harder
If you don’t already have one, it’s a good idea to have a cash buffer in place so that if you lose your job or have any unexpected expenses to cover, you’ll have some savings to fall back on.
Savings returns are pretty dismal at the moment, but you should still try to seek out accounts with the best rates of interest, to retain as much of the purchasing power of your money as possible. You can find current best cash ISA rates in our article Best cash ISA rates – which cash ISAs pay the most interest?
Ideally you should check how much interest you’re earning every few months and transfer your savings to an alternative account if higher rates become available elsewhere. This might feel like a hassle, but over time it can prove well worth it. You can work out how much extra interest you’d earn by switching savings provider using the Which? savings booster tool and you can see the current savings best buys at savings website Savingschampion.co.uk. Learn more about making your savings work harder for you in our guide Five ways to boost your savings returns.
Extending your mid-life MOT into other areas
Money may not be the only aspect of your life you’re keen to review. You might also be thinking about your health and ways you can maintain or improve it, and your career and whether it’s likely to continue in its current form, or you’d like to consider a change of direction.
Here at Rest Less, we’ve got loads of resources which you might find useful too. Our Healthy body section has lots of articles on keeping fit and staying healthy, we have a whole section of our site dedicated to looking after your mental health and there are plenty of tips and jobs advice in our career advice section.