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This series offers easy tips for managing your pension, for every decade of your life: in your 20s, 30s, 40s, 50s, 60s or 70s.
Your 70s may be a time to take up new hobbies, make the most of your newfound free time and settle into your retirement but it is important to keep on top of your pension if you want to continue to live comfortably.
Most people have retired by the time they reach their 70s but more and more are choosing to continue in their work, be it full-time or part-time.
Even so, 84pc of over-70s with defined contribution pensions have dipped into their pot at least once, according to a recent survey by insurance provider LV.
Leisure is the biggest priority for most people in their 70s, as they make the most of their good health by focusing on their interests and travelling. But it’s crucial that you do not overspend during this time.
Here are a few tips for those wanting to get their pension plans in order.
The biggest challenge managing your pension in your 70s is making sure you do not draw too much money from your pot, said Kirsty Wright of LV.
If you are 70 years old you will have been able to access your personal pension for fifteen years now. This means that you can dip into your defined contribution pension pot and take 25pc of your pension tax free. Anything on top will be taxed as income like any other.
It is likely that you have been drawing on this to provide sufficient income after you stop working so it is important to check you are within budget. To do this you need to consider how much money you will need to live on above the state pension.
Life expectancy at age 70 is 86 for men and 88 for women, according to the ONS, so there is a chance the latter years would be spent relying solely on the state pension. The flat-rate state pension is currently worth £175.20 a week or just over £9,000 a year.
Pension Pot Calculator 2019
Those who want to guarantee an income and do not want to worry about the ups and downs of the stock market in retirement should consider buying an annuity, Ms Wright said. These insurance contracts pay a guaranteed income for the rest of your life or for shorter periods of, for example, a five-year fixed term. If you want the income to grow with inflation, or cover another person, the amount you receive will fall.
However, as your pension savings are no longer invested there is no potential to grow your savings. If you do opt for an annuity you should be honest and open about any health issues as this is the one time when health issues could have a positive impact on the income you may receive from an annuity.
It is also worth thinking about how your property can be used to help fund the retirement that you want. Those drawing an income from their pensions should consider releasing equity from their home as another way of helping achieve a comfortable and enjoyable retirement.
She said: “You could sell your home and move to a smaller property to raise money and reduce everyday running costs, and you could also consider an equity release plan to unlock some of the value of your home.”
It is also not too late to boost the size of your pension savings if you have spare cash and are under the age of 75.
If you are already drawing from your pension, the amount you can save is probably limited but any contributions you can make will attract tax relief and if you are a lower-rate taxpayer a £100 contribution will be topped up to £120.
However, the maximum you can reinvest into your pension is limited to £4,000 every year and exceeding this limit could have tax implications.
Whether or not you have accessed your pension savings yet it is important to get your investments in order.
If you are in drawdown, the focus of your investments should be on generating income and capital protection with some market growth, according to Brian Henderson of Mercer, a consultancy.
Easily tradeable investments such as corporate bonds, high yield bonds, emerging market debt and a small allocation to stocks and shares can help with that objective, he said.
If you have not started to draw from your pension, you should let your pension provider know the date you expect to access your pension savings as your investments are often based on the number of years remaining to retirement.
Anyone in this position should start thinking about how and when they might access their pension.
Six things you can do with your pension from 55
Under a "drawdown" strategy you can decide on how much of your pension savings you take and when.
Like all income, your pension income will be taxable at your marginal rate of tax, Mr Henderson warned. You can spread withdrawals over different tax years so you don’t slip into a higher tax band.
Reader Service: Try our free equity release calculator and see how much tax-free cash you could release from your property
You should avoid making big withdrawals if possible so as to avoid the risk of losing out if the stock market falls, he added.
“If possible, aim to withdraw the income and dividends from your investments. This should leave the underlying investments available to you later in life.”
It is likely that you have several pensions from your working life that have each accumulated significant amounts. If you have not already done so, you may want to track down any old pension you have and consolidate them. This can often be a chance to pay less in charges and is easier to manage.
The Government runs a pension tracking service, which can be helpful for locating old pots.
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