5 minute read
“How much do I need to retire comfortably?”
It’s one of the most common questions financial advisers hear. Far less common is: what do I want my wealth to achieve beyond my lifetime?
Yet the two questions are closely connected. More than half (54%) of UK adults are considering changes to their retirement or estate plans in response to forthcoming inheritance tax (IHT) changes affecting pensions, according to research by Interactive Investor. The findings highlight that decisions about how you use wealth now carry implications for both your retirement income and what is ultimately passed on to future generations.
After all, every pound you save for retirement could eventually become part of your legacy. Every decision you make about spending, gifting or investing can affect not only your own future, but also the people and causes you care about most.
Retirement and legacy planning are often treated as separate conversations, rather than being part of the same plans.
At a glance
- Retirement and legacy planning are more connected than many people realise.
- Decisions about pensions, property and savings can affect both your retirement and what you leave behind.
- The key is balancing enjoying your wealth today with supporting future goals.
- A financial adviser can help you create a joined-up plan.
Why does retirement planning often come first?
If retirement is on the horizon, it is natural to focus on practical questions.
Will your pension last? Can you maintain the lifestyle you want? How much can you afford to spend each year without worrying about running out of money?
These concerns feel immediate because they relate directly to the next stage of your life.
Legacy planning can feel less urgent. It often involves thinking about subjects many people would rather avoid, including ageing, illness, and what happens after they are gone. As a result, it is often pushed down the priority list.
This can create an imbalance. Retirement planning becomes a detailed financial exercise, while legacy planning is reduced to writing a Will and putting it in a drawer.
A meaningful legacy involves much more than deciding who receives what. It could mean helping children onto the property ladder, supporting grandchildren through education, contributing to charitable causes or ensuring your personal values are passed on alongside financial assets.
As we noted in our earlier article, What is legacy planning and how do your retirement choices shape it?, the most effective plans start by asking what you want your wealth to achieve, both during your lifetime and beyond it. Viewing retirement and legacy through that lens can lead to more intentional financial decisions and a clearer sense of purpose for your wealth.
The balancing act between spending and preserving
One of the biggest challenges in retirement is finding the right balance between enjoying your wealth and preserving it.
According to the Office for National Statistics, median household wealth remains above £500,000 for households aged 65 to 74 and above £370,000 for those aged 75 and over. The figures suggest many people reach later life with substantial assets still intact, creating important decisions about how much to spend, preserve or pass on.
After decades of saving and investing, spending money can feel surprisingly uncomfortable, even when your finances are in good shape. You may worry about future care costs, market volatility or simply outliving your savings.
At the same time, you may want to leave something meaningful behind for your family.
The connection between retirement and legacy becomes particularly clear when you look at your pensions, property and savings. For many people, these assets form both the foundation of retirement and the foundation of any future inheritance.
Decisions that appear focused on retirement today can have long term consequences later. Drawing heavily from a pension, downsizing your home, making large gifts, or relying on cash savings for income can all affect the value of the estate you eventually leave behind.
Equally, focusing too heavily on preserving wealth can create problems of its own. Some people become so concerned about protecting assets for future generations that they end up restricting their own lifestyle unnecessarily.
There is no universal right answer. The key is finding a balance that allows you to enjoy the life you want while keeping future goals in mind.
Why is legacy planning about more than inheritance?
When you think about legacy planning, inheritance may be the first thing that comes to mind.
In reality, passing wealth on is not just about what happens after you’re gone. Many people want to see the impact of their support during their lifetime, whether that means helping family members achieve important goals or providing financial security when it is needed most.
This is why legacy planning is about more than deciding who receives what. It is also about deciding when, how and why wealth is transferred.
The challenge is that these decisions do not happen in isolation. Pensions, property, investments and savings can all play different roles in both retirement and estate planning.
Recent changes to inheritance tax rules affecting pensions highlight how closely retirement and legacy planning are connected. Pensions have long been regarded as an efficient way to pass on wealth, but changes from 2027 mean some pension assets could form part of an estate for inheritance tax purposes. As a result, decisions about how and when you access pension wealth may have implications not only for your retirement income, but also for what you leave behind.
Why a joined-up plan often works better
The strongest financial plans recognise that retirement and legacy planning are part of the same conversation, rather than competing goals.
Research by Legal & General found that 46% of over 50s have provided financial support to family members, whether through gifts, help with housing costs or other forms of assistance. The findings underline an important point: for many people, legacy planning is already happening during retirement, not simply after it.
While many people are already supporting family members financially, they may not think of these decisions as part of legacy planning.
Bringing retirement and legacy planning together starts with asking yourself a few important questions:
- How much income will you need to live comfortably?
- What level of financial security would help you sleep well at night?
- Would you like to support family members during your lifetime?
- How important is it to pass wealth on efficiently?
- What impact would you like your wealth to have in the future?
Considering these questions together can help you make more informed decisions and avoid unintended consequences.
It can also make family conversations easier. While discussions about inheritance are not always comfortable, greater transparency can reduce misunderstandings and help ensure expectations are aligned.
Tools such as trusts, life assurance and structured gifting strategies may also play an important role, depending on your circumstances. As discussed in our articles on trusts and life assurance, these solutions can help balance your own financial security with your longer term wishes for family and beneficiaries.
How can financial advice add significant value?
An adviser can help you step back and see the bigger picture. Rather than looking at pensions, investments, property and estate planning separately, they can help you understand how each decision affects the others.
They can also help review your position and identify any areas that could be strengthened stress test different scenarios and ensure that your retirement income strategy supports both your lifestyle goals, and your longer term wishes for family and beneficiaries.
Most importantly, they can help you strike a balance between enjoying your wealth today and preserving options for tomorrow.
If you would like to review your plans, a Flying Colours adviser can help you take a more joined-up view of your finances and work with you towards a clearer plan for retirement and beyond. You can arrange a time to talk here: https://fcadvice.co.uk/book-an-appointment/
Please note:
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) 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. Investments should be considered over the longer term (minimum of 5 years) and should fit in with your overall risk profile and financial circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, tax planning, trusts, or Will writing. Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
Planning horizons are illustrative and will vary based on individual health, circumstances, and life expectancy.