This article is the first in a series of articles, written in conjunction with the Financial Times' Next Act hub. It takes a look at some of the financial issues facing people in their 50s and is sponsored by Canada Life.
The majority of people might adopt a certain laissez-faire approach to their pension, perhaps checking on their nest egg annually, happy in the knowledge they will ultimately enjoy the fruits of their life’s career.
But the reality of the past year has forced many to address later life decisions prematurely, as barely a day passes without news of fresh redundancies.
The latest figures from the Office for National Statistics paint a grim picture of the labour market, with redundancies reaching a record level of 370,000 between August and October last year.
With hundreds of thousands facing financial turmoil, the resounding narrative from the professionals is clear — seek advice before embarking on any potentially life-changing decisions.
But what exactly might that advice look like?
Avoid the panic button
Tracy Crookes, a chartered financial planner at Quilter, urged those facing redundancy not to panic and avoid taking money from their pensions without understanding the implications.
Ms Crookes said: “I met someone who had earlier this year accessed their pension pot completely, because they felt they needed the funds and then came to me to start making pension contributions again when circumstances changed.”
But the client had triggered the money purchase annual allowance, whereby future pension contributions were restricted to £4,000 a year.
Ms Crookes said: “They had no idea what that was or what it meant, but the decision they made earlier had that knock-on effect. The key message is to get advice and don’t react too quickly. Take time, there is help out there.”
Additional decisions are thrown into the mix with the prospect of a partially tax-free cash redundancy payment, particularly against the backdrop of years of economic uncertainty.
Many in their 50s may have doubts about whether they will be re-employed after being made redundant and some may consider using a payout to make a dent in their mortgage.
Neil Moles, chief executive of national advice firm Progeny, said the biggest deciding factor was whether the client had another job lined up.
He said: “The reality is everyone wants to retire without a mortgage. So paying down debt is a key cornerstone of financial planning.
“But I spoke with clients recently on this very thing, and the question was: do I use this money to pay down my mortgage or invest? And the consideration was: would you take out a loan to invest?”
And for those with enough of a cash buffer to offer security throughout unemployment, or who are fortunate enough to have secured another job, Ms Crookes suggests the possibility of paying some, or all, of a redundancy sum into a pension.