If you’re a midlifer, you won’t need us to tell you how much has changed since you started work – more women in employment, huge changes in working patterns, the constantly moving goalposts of the state pension age, the arrival of auto-enrolment, the gig economy, and, of course, all the practical and financial responsibilities off supporting to both children and parents to add to the mix.
Fifty years ago the typical life expectancy for a woman was 75, it's now risen to 86. Good news indeed! And while the state pension age is higher than it was in the 60s (and rising), it means we have far longer in retirement than previous generations. If you want to make the most of this (typically) 20 year window of opportunity, it needs planning for.
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A good time to take financial stock
Life is busy, we know, but it's because of all of the above that it's so important to pause now, give yourself a midlife money MOT and check you are on track for financial security in later life. The government has even set up a new Midlife MOT website.
If you're in your 40s or 50s, your retirement is probably wavering like an oasis on the horizon but you will want to be sure that when you get there you have the financial freedom to do the things you want.
"It’s a stage in life where you have often undergone a lot of change that has financial implications," says Laura Suter, head of personal finance at AJ Bell. "You might have had children who are still financially reliant on you, been through career change, experienced divorce, had an inheritance, fallen into debt or built up savings. It's a good idea to check that your finances can support what you plan to do in the next few decades, to make sure your money is on the same track as your life plan."
Your 5 step money MOT
1. Brush up your budgeting skills
“Your basic monthly budget is the foundation for all your financial planning. If you are spending more than you are earning, try to work out how to balance this,” says Alistair McQueen, head of savings and retirement, Aviva.
There are some useful tools to help you brush up your budgeting skills, from the budget planner at MoneyHelper to tools within your banking app or budgeting apps like Money Dashboard, Hyperjar and Snoop.
*Could better budgeting create more money for your savings pot? Reducing unwanted or redundant expenditure is a good way to free up money. Make sure you aren’t paying interest on any card debt, check if you are entitled to any benefits or reductions that might boost your income. Think about new ways to reduce household bills.
*Could your savings be working harder? Some high-street savings accounts are currently offering as much as 5+% interest. Use comparison websites such as Moneyfactscompare and MoneySuperMarket to track down a better deal and switch.
*“Look at any debts you’ve got, from credit cards to store cards to overdrafts or buy now pay later," says Laura Suter, head of personal finance at AJ Bell and founding ambassador of Money Matters by AJ Bell. "It’s a good idea to move debt to the cheapest option possible, such as a 0% overdraft or credit card, but it will depend on your credit rating whether you can access this. Your next stage should be working out a plan to pay down the debt," she says.
2. Check your pensions
*First, get a state pension forecast. This will tell you how much state pension you could get, from what age, and how you might be able to increase it. Visit Gov.uk/check-state-pension. “For most people this is biggest single source of income in retirement, but lots don’t understand what they are entitled to and from when,” says Alistair McQueen.
Check your National Insurance record for any gaps and fix any errors. "You can also pay to fill in any gaps if you’re likely to fall short of the 35 years of credits needed to get the full state pension," says Laura.
*Find out how much you are on course to get from private and workplace pensions, and when you will be entitled to take these. You should be receiving an annual statement from the pension provider even if you aren’t actively paying into it. If in doubt, ask your HR department.
*Use a free online pension calculator tool to work out what your total projected income, using your state and personal pension forecasts, and any other savings that you'll have. "Doing this sounds complicated but there are many free online calculators where you just put in state and private pension figures and it will tell you what kind of income you can expect when you reach retirement,” says Alistair McQueen. “Then you will be in much better place to know whether you are on track, behind curve, or even ahead of curve and can react accordingly.”
*Consider consolidating smaller pots. "People will often have had multiple jobs by this point and so may have lots of small pension pots sitting around. Track these down, either through old paperwork or the Government’s pension tracing service. Consolidating your pensions into one pot is often a good idea as you only have one login to remember and it’s easier to work out how much you have saved," says Laura.
Check out MoneyHelper’s pension calculator, Unbiased’s version or the calculator on your own pension provider’s website. Use the Pensions and Lifetime Savings Association ‘Retirement Living Standards’ guide to see whether you are on track for a basic, moderate or luxury retirement.
It’s also worth remembering, says Alistair, that more than 1.5m people in the UK work beyond the age of 65. “That might be the mindset shift you need to take - retirement need not be working then not working; you can flex your lifestyle, maybe reduce your hours but continue working to provide additional income.”
3. Think about where you plan to live when you retire
Will you be mortgage free in your own home, renting privately, downsizing? If you are paying off a mortgage when will this end?
“Mortgages are a hot issue at this age. You might have paid off most of your mortgage and be looking at the end date nearing or you might have just upsized or borrowed more and need a plan to pay it off before retirement," says Laura Suter.
"Either way it’s a good idea to work out when you’ll pay off the debt and whether that aligns with your plans. If you’re in a position to do so you could overpay to pay off the debt sooner and save money on the interest, just check that your provider allows it and what their limits are. If you think you won’t pay it off before retirement you’ll need to work out if you can afford it on your retirement income or whether you need to work for longer or downsize to pay off the debt,” she says.
4. Family resources central (yes, we mean you!)
Bank of mum and dad: more than half of those aged 55 or over are helping family members financially to get on the property ladder – whether by giving money directly to help with the purchase or having grown-up children live at home while they save up.
Whatever financial support you're providing, it’s important to understand the impact on your own finances. Can you realistically afford to keep doing this without it having a detrimental effect on your future financial security? If the answer is no, consider what steps can you put in place to mitigate.
Unpaid carers: in PensionBee's new Carer's Gap survey, 66% of women aged 55 to 64 reported having to take time out of work to perform unpaid care at some point: 43% to look after children, 37% to look after parents and 23% to look after grandchildren.
You may be limited in what you can do when the situation is ongoing but, says Becky O’Connor, director of public affairs at PensionBee, "any pension you already have will still be growing over the years, thanks to investment returns - and the longer it is invested the more chance it has to grow. Any small contributions you are able to make will also help."
Take advantage, too, of any benefits available to you, such as Carer’s Allowance or Child Benefit, if you are eligible for it. "It’s also possible to pay into a partner’s pension, so if you have a partner and they are able and willing to pay into yours while you are caring, this can keep your pension on track. The most you can pay into a pension in a tax year, as a non-earner, is £2,880 - which comes to £3,600 with tax relief added on top," says Becky.
You may be able to claim National Insurance credits for years spent caring rather than working, so you keep building up your State Pension entitlement.
The menopause factor: another thing women need to bear in mind is the potential disruption to their working life and career they may have in the coming years, says Laura Suter. Research from Money Matters by AJ Bell found that one in 20 women going through the menopause had to quit their job as a result, while another 1 in 25 had to cut back their hours – which clearly has financial implications.
5. Ask the experts
*The government recently launched a new midlife MOT website to help older workers with financial planning, health guidance, and to assess what their skills mean for their careers and futures.
*If you are 50+ and have a personal or workplace pension, you can access a free one hour appointment with Pension Wise, impartial advice from MoneyHelper. There is also a pension review for the self-employed.
*There's possibly no more important time than midlife to check in with expert financial advice. Consider talking to a financial planner who can review your current situation and help you plan for the future; find one at Unbiased or Vouchedfor.
*Check what benefits you might be able to get at Turn2Us or Entitledto and what National Insurance credits you might be entitled to.
