Financial security is something we all aspire to have and to see our loved ones enjoy. However, according to a study by the Financial Conduct Authority, about 15 million people have no pension savings which means one in three retirees within the UK will have to rely completely on a state pension.
The current state pension sits at £159.55 per week and without an additional private pension or life savings, this means that elderly people could be struggling throughout their retirement. These facts may seem bleak, but there are simple and effective finance tips which can be followed to ensure financial comfort and safety in later life.
Save Save Save!
This is a no-brainer! If you save and encourage your family to save, then there will be more money to enjoy when you really need it. Saving certainly is easier said than done as things break, bills have to be paid and 'rainy days' often come around, but as one well known supermarket brand says, "every little helps." Popping a little bit of money away every week or month soon adds up and could make a huge difference when it comes to retirement. Here are some helpful finance tips on how to cut your costs:
- Budget - Make sure you're aware of upcoming costs. If you know what you need to spend, you'll know what's left to save and this will make budgeting much easier.
- Look for deals and discounts - Most retailers (online and in-store) have regular sales, discount codes and deals. Simply searching "voucher code" on any well-known search engine could save you money!
- Drink more water - Not only does water have many health benefits, it can stop you spending money on fizzy or hot drinks and even help you eat less. Having a glass of water before each meal helps you stay fuller for longer.
- Research - Websites such as the Money Saving Expert offer lots of regular tips the latest money saving deals, be sure to stay up to date!
- Buy used - Don't be afraid to buy things second-hand, ex-display or pre-owned. Not everyone gets rid of things because they're broken, you could be missing out on a bargain!
It's also worth looking into benefits for the elderly, if your loved one is older it's likely they can benefit from discounts and allowances such as a free bus pass, over 60's help, discounted senior tickets, disability living allowance and more.
Bills are a necessary evil. They're not enjoyable at any point in life but can be especially difficult for the elderly. Bills can cause worry due to the fixed income retirees face, so it's essential to stay informed and make sure you're getting the best deals and services possible. It may be difficult for an elderly loved one to haggle or scour the internet for the best deals, so try to make sure you're there to help and, if necessary, make a call or two for them.
It's essential to remember that no matter which supplier or provider you choose to use, the service you're receiving is more than likely going to be the same. When it comes down to it, electricity and water all come from the same place, the main difference will be the effectiveness of the company supplying it and the customer service team it employs, so ensure you're not fooled by companies claiming they have something extra special.
Take a look at price comparison sites, they make comparing tariffs quick and easy but may not show every deal. The previously mentioned Money Saving Expert is a great place for hints and tips and is regularly updated with good deals.
Start a Pension
In layman's terms a pension scheme is simply a way of saving for later life. Most people are entitled to a state pension once they've retired and reach state pension age, but you could also have a personal or workplace pension. As we mentioned earlier, the state pension currently stands at under £200 per week which should cover basic needs, but if you want your loved one to have some extra money to make retirement more enjoyable, a pension scheme is advisable.
If your family member is still working, that's one less thing to worry about as they will automatically be enrolled into a workplace pension by their employer. The law was recently changed making it a requirement for people over the age of 22, making more than £10,000 a year, to have a workplace pension. Another great option is to open a private pension, this is a lot like a workplace pension except it's opened by the individual rather than the individual's employer. Here are some benefits of a private pension:
- You can set up regular contributions (e.g. monthly or quarterly) or make one-off payments.
- A private pension can be opened alongside a workplace pension.
- Other people can contribute to a private pension, for example you could contribute to a loved one's pension.
- There is tax relief on private pensions, the standard rate of relief is 20%, which means that if £8,000 was paid HMRC would add another £2,000 bringing the total to of the private pension to £10,000.
Investing money carries a higher risk than your standard savings account but it can come with immense benefits. An investment can offer a lump sum when it comes to retirement or a steady income throughout. Savings accounts offer security and ease of access, but the returns can be small, whereas a bit of risk on an investment can have a large return, but it is not guaranteed. Here are some things to remember when considering an investment for your loved one:
- Risk - With every investment comes some risk, and normally the bigger the risk the bigger the likely return - but this is not always the case. Having your money is a savings account is the safest way to protect your funds, but interest rates are typically lower than inflation so don't bring much return. Evaluate how comfortable your family member is with the risk and go from there.
- Consider mixing investments - Generally, different asset classes don't do well all at the same time. If you invest in a selection there is a higher chance you'll always have one investment doing well and reduces the risk of your overall investments doing badly.
Planning ahead is very important and applies to plenty of different things, for example a pension is a great way to plan ahead! In this case, we mean planning very far ahead and helping to arrange your loved one's will and power of attorney. There are many reasons you would need to make decisions for you loved one, here are just a few:
- If your loved one loses the mental capacity to think for them-self through illness, accident or old age they would appoint someone they trust as their power of attorney. This means the appointed person (or persons) could make decisions and help with legal matters.
- It could be temporary, your loved one could be in hospital for a short amount of time and need help with normal things such as making sure the bills are paid.
A power of attorney is a legal document that allows someone to make important decisions for your loved one. Without a signed power of attorney, you would have no access or authority over your loved one's money or welfare. There are three types of power of attorney:
- Welfare Power of Attorney - This gives you authority to make decisions about your loved one's welfare.
- Continuing Power of Attorney - This gives you authority to manage your loved one's finances, including their property.
- Combined Power of Attorney - This gives you authority to make decisions over your loved one's finances and welfare. This is the most common type of document.
Creating a will is just as important as arranging power of attorney as it makes it clear where your loved one's money and possessions go. One in two UK adults haven't got a will, which can cause issues after death as without a will the government decide how an estate is distributed.
Setting up a will doesn't have to be a complicated process, they can be done by the person wanting one and then made legal. It may be preferable to go through a solicitor or someone legally qualified to write your own and your loved one's will as you should try to avoid small mistakes which can cause large problems in the future. There's plenty of advice online so be sure to search around when looking for legal help, to ensure you're getting a good level of service for your money.
Prepare for the Worst
Talking about funerals with your loved one can be an uncomfortable and depressing affair. Sadly, it's something that should be discussed before the inevitable happens as funerals can come with plenty of costs of their own. According to the Royal London National Funeral Cost Index Report 2017, the average cost of a funeral with a traditional burial is £4, 257 and with a cremation is £3,311. Costs to bear in mind are funeral director fees, local authority fees and any extra costs such as the burial, cremation, grave site, ceremony and the wake.
It's usually the person or people arranging the funeral who have the responsibility of covering the cost of it, but that's not to say that there aren't other financial resources available. If your loved one has funds in their estate, their funeral expenses can be claimed back from this and some funeral directors will allow payment to be delayed until your loved one's estate has been unfrozen and divided.
If you receive certain benefits, you could be eligible for a funeral expenses payment to help with expenses such as burial or cremation fees, the cost of travel to the funeral and death certificates or other documents. The payment won't usually cover the entire cost but it can be a massive help with the ever rising cost of funerals within the UK.
Insurance is Key
As a child or grandchild, one of the most important finance factors that you need to know and share with your elderly relatives is life insurance. Everybody should have a policy in place to ensure that their family are protected financially once they pass away.
A life insurance policy will release a sum of money to the family of a deceased person, which can be used to clear any debt, pay the mortgage off, towards funeral costs and for general everyday use in order to be financially stable. Without it, the family may struggle to keep up with bills and mortgage payments.
The cost of life insurance varies, depending on several different factors such as lifestyle choices, age, health, policy length and the amount of money that is being covered. Bad habits such as smoking or dangerous job roles will increase the premium. Life insurance is cheaper for younger and healthier people, so it's better to get it sorted sooner, rather than later!
To ensure that your family are protected, perhaps you could sort out your policies together. This way you can help ensure that both you and your relatives find the best possible policy and are covered for everything that is relevant. When making your policies, it is suggested that you cover around 10 times the annual income of the highest earner in the household.
Careline Alarms - A Top Finance Tip
One of the best finance tips that we can offer you would be to consider a Careline Alarm for your loved ones, especially if they live alone or suffer from long-term health conditions. As your parents, or grandparents, age they can begin to struggle with everyday activities and the day might come where they have a fall or have a health scare.
This worry can consume them, and you for that matter, and the first thought may be moving into care. Our service is a more affordable and easier option and allows your loved ones to remain in comforts of their own home. One push of a button will alert our monitoring team, who will respond immediately and arrange for help to go to your loved one's home. As an emergency contact, you will be one of the people contacted should an incident occur.
Our alarms ensure that there is always help available, day or night, and can give both the alarm user and their friends and family the peace of mind they require. For more information about our service, please call 0800 101 3333, or complete our contact us form and a member of the team will be in touch shortly.