Thinking about passing away and leaving loved ones behind can be incredibly difficult. While it can be challenging, many Brits have thought about what their preferences would be, and millions want their loved ones to celebrate their life.

According to a survey from Co-op Funeralcare, a third of Brits feel like funerals, in general, are too sombre and should be more uplifting. So, it’s not surprising that an estimated 35 million would prefer their funeral to be a celebration of life. This could cover a variety of areas including attire, with a fifth of people saying they’d prefer mourners to wear bright colours, rather than the traditional black.

If you have clear ideas about what you’d want, it’s important to set out your wishes for loved ones. There’s more than one way to do this.

1. Have a conversation with loved ones

Conversations about death with loved ones can be difficult. However, conversations with loved ones can help them understand what your preference would be and your reasons behind them. It’s a step that can mean your wishes are more likely to be followed.

It can help loved ones too. At a time when they’re grieving, having an idea about what you would want can help them to make decisions.

2. Write your wishes in your will

When you’re writing or reviewing your will, you can also set out your wishes. This could be whether you’d prefer a burial or a cremation, or even details like the attire you’d like guests to wear. Again, it’s a step that can provide loved ones with guidance when they’re making arrangements for you.

It’s important to note that while you can set out funeral wishes in a will, they are not legally binding.

3. Choose a funeral plan

If you want more control over your funeral, choosing a funeral plan could help you. A funeral plan is a way to pre-arrange the funeral you want. What’s covered will vary between providers and there will usually be several different options to consider. A plan could include details like flowers, catering, and other aspects that are important to you. The more comprehensive packages cost more but will give you more flexibility and control.

A funeral plan also means you’ll pay for the costs during your lifetime. It can reduce the financial stress that family members may experience, and give you peace of mind. In some cases, if you pass away before the full costs are met, the provider will cover it; in others, your family will have to make up the shortfall.

Make provisions to ensure your wishes are carried out

If a funeral plan isn’t right for you, it may be worth making provisions to pay for a funeral. It can take some of the pressure off your loved ones and ensure there is enough to carry out your wishes. According to a British Seniors report, the average cost of a funeral between 2016 and 2021 was £5,531. Your choices will have an impact and the report found some funerals cost £7,500 or more.

Worryingly, 38% of people said they struggled to cope with the extra financial strain of a funeral. This figure rose to 46% for a burial. Around one in three turned to some form of borrowing to fund a funeral. If you want to make sure the cost of your funeral is taken care of for your family, you do have options. Among them are:

1. Taking out a life insurance policy: A life insurance policy that runs for the rest of your life will pay out a lump sum to your beneficiary when you pass away. This money can then be used to fund funeral costs and provide financial security to loved ones.
2. Paying from your estate: You also set money aside within your estate, for example, in a savings account. This provides you with flexibility as you can use the savings to provide a financial safety net during your life too. Your bank should release funds from your account when they’re presented with an itemised account from the funeral director and a copy of a death certificate. However, in some cases, loved ones may have to wait for the probate process to conclude.

Setting your affairs in order

If your funeral wishes are something you’re thinking about, it’s also an opportunity to make sure your affairs are in order. Does your will accurately reflect your wishes? If you need to consider Inheritance Tax, have you taken steps to reduce the bill? We can help provide peace of mind about your estate and long-term goals.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

Accessing and paying for care have become big issues. As more people reach old age, more people will inevitably need some level of support as they get older. Now, the government has taken steps to fund social care and limit the cost to individuals.

So, how does the new care cap work and who will benefit from it?

Social care reform: A National Insurance hike and care cap

In September 2021, the government announced some key changes to social care and how it’s funded.

Among the changes is a National Insurance (NI) hike. NI contributions will increase by 1.25 percentage points from April 2022 to allow the government to invest more in health and care. From 2023, the Health and Social Care Levy will be a separate contribution.

The government estimates the new levy will lead to a record £36 billion invested in the health and care system over the next three years. Some of this will go towards helping the NHS tackle Covid backlogs, as well as reforming adult social care.

Most individuals need to pay for at least a portion of their care costs should they need support. According to Which?, the average weekly cost of residential care was £681 in England in 2019/20. This figure increased to £979 a week if nursing care was required. Over a year, that would lead to bills of £35,412 and £50,908 respectively.

You may have heard from family and friends, or even in the news, of people needing to sell their home or other assets to fund their later-life care. As a result, you may be worried about the future.

The government has now introduced a care cap. From 2023, no one will pay more than £86,000 for the care they need for daily tasks. It said the reform will end “unpredictable and catastrophic care costs” to make the system fairer. However, the cap isn’t as straightforward as it seems.

What does the cap cover, and who will benefit?

Crucially, the cap will cover care costs only. It will not cover daily living costs, such as accommodation, energy bills, or food.

For care home residents, it can be difficult to understand how much of their current fees go towards care, as bills are not usually itemised. However, the Telegraph reports that a typical person in residential care costing £1,100 a week can expect just £350 of this to go towards care.

In this scenario, just £18,000 of a total £60,000 annual bill would contribute towards the cap. As a result, the person would only start to receive government support after five years, while during this time they would have spent £210,000 of their own money on non-care items.

In addition, few care home residents will survive long enough to reach the cap. As care is often a last resort or only used when an individual needs round-the-clock care, half of people do not survive longer than a year after they move into a care home.

The care cap could benefit those who remain in care for several years. However, they will still need to be aware of how they’ll pay for non-care costs, whether from their assets or income.

60% are considering an alternative to care homes

It’s not just the cost of care homes that worries people. Some 60% of UK adults, the equivalent of 31.6 million people, said they worry about moving into a care home after seeing how Covid-19 spread in them, according to an LV= survey. This number increased to 65% among the over-55s.

Around the same proportion (61%) said they’d prefer to stay in their own home.

While this can seem like a cheaper option, it does still come with costs. You may need to adapt your home to make it suitable for your needs or need a carer to visit regularly to lend support, even if family can help. These costs can still add up to thousands of pounds every year and it’s important to understand how you’d pay for them and the impact it could have on your income.

No one wants to think about becoming ill or needing more support in old age. But by making a plan and setting aside some of your money to fund it if needed, you can have greater confidence in your future. Being proactive can also mean you have more choices. For example, having your own care fund to draw on may mean you’re able to choose a care home that’s close to loved ones and has facilities you’ll enjoy.

If you haven’t thought about your care preference or how to use your assets if you need care, please contact us. We’ll help you put a plan in place that can deliver peace of mind.

Please note: This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

Hopefully, you head into retirement confident in your finances and your retirement income. While your financial commitments and dependents may be fewer in retirement, it’s still important to have a safety net to fall back on when you need it most.

According to a report in Money age, 49% of those aged over 65 describe themselves as in “excellent” or “good” financial shape. Yet just 21% think they have plenty of money set aside for emergencies, which could leave the remaining people exposed to financial shocks.

While an emergency savings account isn’t something you use day-to-day, it plays an important role in your financial security. Ahead of retirement, you may have paid off your mortgage or no longer be supporting children. So, maintaining an emergency fund may have slipped down your priorities.

Maintaining a rainy-day fund can help ensure you remain financially secure, even when the unexpected happens.

How much you should have in your emergency fund depends on your circumstances. As a general rule of thumb, it’s a good idea to have three to six months of outgoings in an easily accessibly account to tide you over when it’s needed most. As you want to be able to access these savings as soon as you need them, a cash account makes sense for most people.

Planning for unexpected expenses

Your expenses might go down in retirement, but the unexpected can still happen. From a roof needing repairs to a boiler breaking down, you never know when you might need to dip into savings to cover unexpected costs. Having an emergency fund means you can rest assured that you’ll be able to cover these expenses should you need to.

Keeping an emergency fund ready for these circumstances can help ensure your retirement plans stay on track.

Providing a safety net against market volatility

As a retiree, it’s not just unexpected costs that can affect your income. You may be withdrawing an income from investments and market volatility could have an impact.

If you’ve chosen to access your pension through flexi-access drawdown, the value of your pension can also be affected by investment performance. With flexi-access drawdown, you can take a flexible income to suit you. The remainder of your pension will usually remain invested. As a result, the value will rise and fall.

If investment values fall and you continue to withdraw the same income, you’ll have to sell more units to achieve this. This means you could deplete your pension or investment portfolio quicker than you expected, and no longer have enough to maintain your standard of living for the rest of your life.

Having an emergency fund you can use amid market volatility, such as that experienced in 2020 during the first Covid-19 lockdown, means you can reduce the amount you withdraw from your pension. This means you won’t have to sell units when prices are low. Historically, markets have recovered from volatility and investment values have risen following dips. While guarantees can’t be made, having a financial buffer can help you ride out short-term volatility and minimise the long-term impact.

Managing pension investment risk in retirement

As well as having an emergency fund to fall back on, there are other steps you can take to manage the impact of market volatility on your pension and retirement income.

Leaving your pension invested can make sense, but it’s important to understand that it does come with risks. By leaving your pension invested, you’re providing it with a chance to grow over the long term. With average retirement lasting decades, you can still benefit from long-term investment trends to help your pension go further.

If you choose this option, one thing you will need to consider is how much investment risk is appropriate for you. This should consider a range of factors, from what other assets you hold, to what your goals are. If you’re not sure how much risk you should be taking with your pension, please contact us.

Remember, flexi-access drawdown isn’t your only option when taking an income from a defined contribution (DC) pension either. If you’d prefer security over flexibility, an annuity can make sense. An annuity is something you buy with a lump sum, which then provides a guaranteed income for life. In some cases, the income delivered from an annuity can be linked to inflation to preserve your spending power. This means you won’t need to worry about investment volatility affecting your income.

Whether you’re nearing retirement or are already retired, it’s important to have confidence in the choices you make. We can help you understand what your options are and how to mitigate risks, including creating an emergency fund. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts. 

September will mark the first Income Protection Awareness Week. Income protection can provide financial security when you need it most, but it’s often something that’s overlooked. If you recognise these five scenarios, it may be worth looking at how income protection could fit into your wider plans.