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Let’s face it. Most of us are far too busy coping with the present to give much thought to the future. And, even when we do, the future can feel like a very scary and uncertain place.
But it is definitely worth stopping to think for a moment about different future scenarios. The “what ifs” that we would never want to happen but sadly sometimes do. But the good news is that with a bit of forward planning, you can ensure that your family would be provided for in the future, even if some of those “what ifs” were to happen.
So in this article we take a quick look at five ways to future proof your family’s finances. We will look at:
The earlier you start pension planning, the more likely you are to be comfortably off financially when you retire. The current state pension is a maximum of £203.85 per week, though the amount you get depends on various factors, including the amount of National Insurance you have paid. You can check your state pension forecast on the Gov UK website. State pension age will rise to 67 by the end of 2028, and this will be reviewed within two years by the next Parliament to reconsider a further rise to age 68.
If you are in employment, you should also automatically be enrolled into your occupational pension scheme if you earn more than £10,000 per year and are aged between 22 and state pension age. If not, check with your employer what the situation is. In an occupational pension scheme your employer will contribute money into it, usually at least 3% of your salary. You will also usually have the option of making extra payments into it, which is well worth doing as you will not only increase the value of your pension but also pay less tax, as pension contributions are taken out of your salary before tax.
Whether or not you have an occupational pension scheme, you can also take out a private pension and make payments on either a regular basis or by a lump sum. Just like the occupational pension scheme, private pension payments will usually be eligible for tax relief. The advantage of a private pension scheme is that you can access it earlier than state pension age, and can withdraw up to 25% of it tax free. This could provide a nice little nest egg if you want to retire early.
As well as making the best use of pensions, it is worth considering whether you want to take out any form of life insurance. Life insurance could pay out either a lump sum or regular payments to your family if you were to die, and provide financial support when they need it most.
You could also consider critical illness cover, either as part of your life insurance package or separately. Critical illness cover would provide a tax-free payment if you were to be diagnosed with a major illness such as cancer, heart attack or stroke. This could help you continue to pay bills and support your family finances while you are having medical treatment, or if you become terminally ill or permanently disabled.
Stop and think who you would want to make decisions for you if you become unable to do so yourself? If something happened to you it would make everything a whole lot easier for your family if there was someone else already authorised to handle your money, bank accounts, mortgage, bills etc without your family having to wade through mountains of bureaucracy to do so.
The way to achieve this is by setting up a lasting power of attorney (LPA). This is a legal document that lets you appoint one or more people (who are known as attorneys) to make decisions on your behalf. There are 2 types of LPA – property and financial affairs, and health and welfare – and you can choose whether to make one type or both:
This LPA authorises your attorney to make decisions about money and property for you, such as managing your accounts, paying bills, collecting benefits or pension, or selling your home.
This LPA authorises your attorney to make decisions about your medical and personal care, including the option of moving you into a care home and whether or not you should undertake life-sustaining treatment.
You can set up an LPA yourself by completing forms available from Gov UK, then registering them with the Office of the Public Guardian. The cost is £82 to register each type of LPA and the process can take up to 20 weeks. Or if you prefer, you can ask a solicitor to do it for you; bear in mind they will charge for this over and above the £82 LPA fee.
Again, something we don’t like to think about, but if you were to die, what kind of funeral would you want and who would pay for it? There are many different types of funeral and it would perhaps be a comfort for your family to know that you were having the kind of funeral that you would have wanted.
How you decide to arrange this is up to you. You may simply want to leave written instructions as to the type of funeral you want, and to put aside some money for it (or perhaps earmark part of your life insurance to do this). Or you could sign up with a company that arranges funeral plans and will lock your money away – together with the details in the plan – until it is needed.
It always seems too early to make a will, yet this is never the case. If you were to die “intestate” – i.e. without making a will – this can lead to all kinds of complications. Your estate (which includes your home and any money, savings or other assets) would be legally allocated to your surviving relatives starting with your spouse/civil partner then your children. But nothing would go to a partner who is not a spouse/civil partner or to any stepchildren.
So if you have any kind of blended family, it is especially important to make a will. This also avoids the possibility of probate, where other people come forward who may possibly have some kind of claim on your estate. This can be a minefield for all parties concerned.
You can make a will either by writing one yourself, or have a solicitor do it for you. Either way it needs to be signed both by you and two witnesses, and then kept in a safe place such as your home, with a solicitor or at a bank. If you have nowhere safe to keep it, you can store it at HM Courts & Tribunals Service (HMCTS).
We hope that this article has helped you to think through some of the priorities you need to address in order to future proof your family’s finances in the way that you want to.
In the meantime, if you and your family have any urgent financial needs, remember that Loans 2 Go offer emergency loans that may be able to help.
For more useful lifestyle and financial tips, visit us here again soon at Loans 2 Go.
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