Tens of thousands more of us will soon have the chance to benefit from a £5 million expansion of the Department of Work and Pensions’ “Mid-life MOT” initiative.
It is a structured review for workers in their 40s and 50s that encourages them to take stock of their finances, skills and health, better prepare for their retirement and build financial resilience.
Former CBI director-general John Cridland first mooted the concept in 2017, so it is not a new initiative.
However, perhaps the degree to which it has been embraced has come as a surprise.
The new push follow the successes of private sector pilots and publicly funded trials delivered through Local Enterprise Partnerships. These were launched by insurers Legal & General and Aviva, pension consultants Mercer and the Government’s Pension & Advisory Service, now rebranded as MoneyHelper.
As part of the latest expansion, Mid-life MOTs will be delivered online, in the private sector and through the DWP’s national network of jobcentres.
Minister for Pensions and Financial Inclusion Guy Opperman said: “The challenges we have faced over the last few years have highlighted the importance of financial resilience. As people live longer and healthier lives, planning for work, wealth and wellbeing in later life is vital.
“Our Mid-life MOT expansion will give people the tools they need to assess where they currently are and how they can get to where they want to be – whether it’s that next career move or ensuring they’re on track for the retirement they want.”
A typical such MOT would encompass the likes of how to review pensions regularly, attitudes to risk, how to go about funding your old age, other sources of income such as the state pension, will the total figure meet your essential expenditure in retirement, will you need to work longer, and can you afford to contribute more.
For example, the Legal & General and Open University version covers budgeting, how to cut spending painlessly, reorganising your debts and how to build up your investments to supplement your pension in later life. There is a ten-point checklist too that identifies what areas of your finances are in order and which need attention.
In particular, the MOTs look at the pension options available to you.
MoneyHelper advises: “Think about setting income goals both for now and in retirement. These can act as the main building blocks of your financial plan.
“A good first step to starting retirement planning is to make sure you know where all your pensions are and what they’re worth.
“Setting a retirement income goal – taking into account the State Pension, any personal or workplace pensions you’ve built up as well as any other savings, investments and assets – can then help you see how close you are.
“Get to grips with any debts and set up a rainy-day fund.
“Don’t forget about tax relief when it comes to pensions. If you make contributions in a personal capacity, pensions provide tax relief to boost your savings. When you pay £80 from your bank account, your provider can claim £20 from HM Revenue & Customs to give you £100 in your pension.
“If you’re a higher rate taxpayer, you can claim an additional 20 per cent tax relief. If you have your own company, paying a pension contribution could also reduce your tax bill. Explore the different pension options. Different types of pension can have different features. A Self-Invested Personal Pension can hold commercial property.”
Gone are the days when it was fingers crossed the day before you retire and investment returns, interest rates and inflation have all worked in your favour.