Blog – October 2021

So, you have worked hard all your life and have managed to save enough to set up a comfortable retirement. You may feel like you are ready to stop work and retire but aren’t sure if you have built up enough savings to maintain the lifestyle you currently enjoy.

It’s a very common theme for clients approaching us for the first time — uncertainty over when they can afford to stop work without detriment to their lifestyle.

After working with our clients and producing their financial plan we usually find that clients have severely underestimated what is possible for them; they could have retired earlier or will now have more financial freedom to enjoy their retirement.

Even after the realisation they have ‘enough’ — that’s enough to maintain their lifestyle, be able to cover any unforeseen expenses, the need for long-term care or anything else — experience of working with these clients over the long-term is that although they know they can afford to, they can struggle to be able to turn on the spending tap after many years of saving.

One option is to leave assets to grow — which may give peace of mind but may also mean more tax to pay — either now or in the future when they pass these assets to others on their death. Another option is to make use of the assets now, either to see them being used and enjoyed by their family, or as a solution to save tax such as Inheritance Tax.

Gifts made during lifetime can be made without any immediate tax issue and can help family with any immediate needs such as education, getting on the housing ladder, or making their way in life. Some clients do not like the finality of gifting their money even if they are certain they won’t need access to it in the future — once gifted the money is no longer theirs.

Another option is the use of Trusts; these have the advantage of allowing clients more protection and control to ensure their money is used as intended.

A big consideration when deciding whether to gift or use Trusts is whether access to capital or income is required now or possibly in the future. Whether a client wants to retain control is important as well as the age and capacity of the beneficiaries. Tax is also an important consideration.

Whilst we have found that clients who have used their money in this way have really benefitted from the pleasure of seeing their money making a difference to their loved ones, it is important to recognise that these decisions should not be made lightly. Looking at all the options can take time and involve various discussions with advisers and all of those who may be impacted before making any final decisions.

Please note: The FCA does no regulate tax advice