“Mid-retirement MOTs”: What are they, and are you overdue one?

With people living longer on average than previous generations, you could face a retirement that lasts 30 years or more.

As such, careful financial planning is necessary to ensure that you have enough savings and investments to fund the lifestyle you desire for your lifetime.

However, a new report, Retirement Reality: Managing money in mid-retirement, by Aviva and Age UK, has found that many retirees could face a financial shortfall in later life. As a result, they are advocating for the introduction of a “mid-retirement MOT”.

Keep reading to learn more about the research and discover five key financial matters to review now if you’re retired.

Only half of mid-retirees believe their savings will last for life

Aviva and Age UK believe that their research reveals a “pressing need” for regular financial reviews within retirement – not just in the lead up to it.

Key findings

• Only 48% of mid-retirees aged 65 – 75 who do not take professional financial advice feel confident their pension savings will last for life.
• 65% do not think there is sufficient support for people managing their financial needs as they age.
• Only 26% feel financially secure, with women (19%) feeling less confident about their financial wellbeing than men (32%).

Furthermore, the report revealed that many mid-retirees would need to exercise strict financial discipline to make their money last.

Modelling showed that an over-75-year-old retiree withdrawing from a £100,000 pension pot at a rate of more than 7% would be at “significant risk” of depleting their funds prematurely. With a 10% withdrawal rate, they could exhaust their pension savings within 13 years.

This is why the report recommends the introduction of mid-retirement MOTs.

A mid-retirement MOT could help you adapt to changes and keep your financial plan on track

The Aviva and Age UK report suggests that a mid-retirement MOT could act as a financial and lifestyle review that might include discussion about:

• Estate planning
• Fraud protection
• Access to state benefits
• Managing finances if you experience cognitive decline.

Keeping on top of these matters could help you adapt to changes during retirement, such as:

• Fluctuating spending patterns
• Different priorities and goals
• Shifting market conditions
• New healthcare needs
• Legislative changes.

The report found that the mid-70s is often a point where people need to take stock and review their options to ensure their retirement savings last.

So, if you’ve reached mid-retirement, or your needs and goals have altered since you left work behind, you might be overdue a financial MOT.

If you’ve yet to retire, you might want to consider the “flex first, fix later” approach recommended in the report. This hybrid retirement income strategy allows you to combine the flexibility of pension drawdown with the security of an annuity – which could potentially safeguard you against the difficulties others may face in later life.

5 key financial matters to review now if you’re retired

If you think you might be overdue a mid-retirement MOT, here are five steps you could take to get started:

1. Review your pension savings – Check how much you currently have in all your pension pots combined. This might include private and workplace pensions, as well as a State Pension. Then assess how much you’re withdrawing each year. You may need to adjust this amount to ensure it lasts you for life.
2. Calculate your total retirement income – Assess the value of any additional source of retirement income you have, such as ISAs, rental property, and shares. A financial planner can help you evaluate how well these savings and investments are performing and explore whether it may be beneficial to make any adjustments.
3. Evaluate current and future healthcare needs – If your health has changed since you retired, you may need to budget for additional support both now and in the future. It’s important to consider how your health status could affect your life expectancy, as this may affect how you use your retirement income over the coming years. Additionally, having an up-to-date Lasting Power of Attorney could ensure that people you trust have the legal authority to make decisions about your welfare and finances if you become unable to do so.
4. Stay informed about fraud protection – The BBC recently reported that telephone fraud is on the rise, and scammers are particularly targeting people over the age of 75. A mid-retirement MOT is a perfect opportunity to review and update your protections against financial fraud.
5. Ensure your income is as tax-efficient as possible – Regularly reviewing your retirement finances could ensure that you keep up with changes in tax legislation that could affect both your income and your legacy. For example, from April 2027, your pension may be included in your estate for Inheritance Tax purposes. So, if you wrote an estate plan before this change was announced, you may wish to revisit it to ensure that your loved ones receive as much of your wealth as possible.

Managing your finances may become more challenging as you get older – for example, if you experience a bereavement or receive a serious medical diagnosis. Moreover, estimating your financial income many years down the line might not be straightforward.

A financial planner can use cashflow modelling to provide a clear picture of your future income needs based on different scenarios. As such, they can help you understand your current financial situation and plan for a secure, fulfilling future.

Get in touch

We can help you review your finances and ensure that you’re on track for the retirement you desire, however long it lasts.

Please get in touch by emailing info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can assist you.

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.

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.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, or Lasting Powers of Attorney.

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.

Workplace pensions are regulated by The Pension Regulator.

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 and should fit in with your overall attitude to risk and financial circumstances.