Always look on the bright side of (later) life


AS THE first shoots and blossoms of Spring arrive, the rhetoric is that the worst of the cost-of-living crisis is behind us, or at least losing some of its bite.

But recession or no recession, we’re likely to feel the pinch for some time yet. So what does this mean for “later-life planning”?

Pension plan, estate planning illustration
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Retired workers don’t need to worry about the potential of job market instability or lack of wage growth. They may also be mortgage-free, so rising interest rates are not of great concern. While volatility might see the value of their savings dip, they can usually weather the turbulence, without having to find lump sums for house purchases or public-school fees. Spending in this demographic is often discretionary.

The sting for retirees comes from inflation, especially in the context of low interest rates — something that hasn’t been an issue in recent economic downturns. High inflation impacts all demographics, and the rising cost of fuel and necessities has had a painful impact on people on tight budgets. If interest rates remain low, there is little opportunity to offset the increased outgoings.

This environment can create short-term pessimism, that in turn results in inertia for long-term financial planning. That is compounded for a generation that has not experienced this set of economic circumstances for a long time — and who should be considering estate planning.

Between April 2022 and January 2023, Inheritance Tax receipts grew by almost 10 percent. House prices have generally increased since the pandemic, so more estates will creep above the government’s nil-rate band of £325,000. And that rate band is frozen until 2026, so it won’t take into account any asset price inflation.

The average cost of a care home is £600 per week, which rises to over £800 in nursing care. So perhaps now isn’t such a bad time to re-visit those intimidating financial plans.

Household energy bills will offer some respite during the warmer months, and inflation is reported to have reached a peak. Estate-planning clients might remain cautious, but consider that not acting at all is risky.

  1. Simplify goals

Break larger targets into achievable steps, and highlight quick wins.

  1. Present the facts

A simple, factual assessment of their situation, presented within the context of the broader economy, can help people to understand the most relevant benefits and risks.

  1. Demonstrate extra value

All estate plans seek to mitigate against the impact of Inheritance Tax, but can you deliver additional value with assistance in planning for potential care needs.

  1. Stay flexible

Especially in times of economic uncertainty, it’s important to demonstrate a plan’s flexibility to make a cautious client feel more confident.

  1. Keep your client motivated

Long-term financial plans are what it says on the tin: keep your client motivated and engaged by regularly communicating with them — and celebrating their successes.

 Rebecca Hodges works at Ingenious