Finance for the future
This page contains information on financial options you can prepare for later in life. These options can be really beneficial to make sure you and your family are safe and secure in the future.
A pension scheme is a type of long-term savings plan where you save some of your income regularly when you are working. This gives you an income in later life, when you want to work less or retire. It’s also a tax-efficient way to save money during your working life. Generally speaking, it’s always a good idea to save into a pension if you can afford to do so, particularly if your employer will contribute.
There are several types of pension schemes. Most employers operate a pension scheme for their staff and will enroll you depending on your salary.
- If you earn a salary of £10,000 or more, you should be automatically enrolled in a workplace pension.
- If you earn between £6,240 and £10,000 you will not be automatically enrolled but you have the right to opt in.
- If you earn less than £6,240 you can ask your employer to give you access to a pension to save into. They have to set this up for you, but they don’t have to contribute to it.
You can also choose to set up your own pension scheme. Saving into one scheme doesn’t mean you can’t save into another, or use other tax-efficient savings plans, such as an ISA.
If you should die before you reach retirement age, the money in your pension can be paid to your children or other dependents. This may be as a lump sum or as an income for them, depending on the type of pension scheme you have. You should talk to your pension provider about this and make sure your children are listed as your dependents on your pension policy.
If you don’t have your own pension scheme, you can claim a state pension from the government when you reach a certain age. This is a regular payment from the government which you receive based on your National Insurance contributions. The new State Pension provides up to £179.60 a week (2021-22), which is typically less than you would get from a pension scheme.
There are some changes to the State Pension age at the moment. For people reaching State Pension age now, it will be age 66 for women and men. For those born after 5 April 1960, there will be a phased increase in State Pension age to 67, and eventually 68.
Life insurance allows you to make sure that money is left behind for your family when you die, usually paid as one lump sum upon your death. This allows you to make sure your family will receive a substantial payment which can be used to support them for a number of years, to replace lost income, or to pay off a large debt such as a mortgage. In short, it is a safety net for your family after you are gone. It also greatly simplifies the financial problems which can come from losing a loved one.
You pay a monthly amount (premium) for your life insurance. The cost of this varies a lot depending on your insurance provider as well as personal characteristics such as your age, health, lifestyle, and what level of cover you need. For example, a 30-year old non-smoker will pay a lower premium than a 40-year old smoker.
There are a wide range of life insurance options available, including a number of cheap options. However not all of these offer reliable cover and it is important to look at what the terms of the insurance policy do and do not cover.
The three main types of life insurance policies are:
- Term life insurance, which covers you if you die during a particular period of time.
- Family income benefit policies are a particular kind of term life policy. They pay money to your family as a regular monthly income, rather than as one large payment.
- Whole-of-life policies cover you when you die, regardless on when that may be. These have more expensive premiums than term life insurance.
We recommend reading Which’s guide to life insurance policies for more information, as well as seeking financial advice before making a decision on what kind of life insurance you want to buy.
Your will lets you decide what happens to your money, property, and possessions after your death. It also allows you to say how your children should be cared for in the event of your death, depending on the status of the other parent.
Your will should set out:
- who you want to benefit from your will
- who should look after any children under 18
- who is going to sort out your home and possessions and carry out your wishes after your death (this person is called your ‘executor’)
- what happens if the people you want to benefit die before you
- You can also include a charity in your will.
Help with writing a will
It is not necessary for a will to be drawn up or witnessed by a solicitor. If you want to write your will yourself, you can however it is important that you make sure your will is legal (see below). You should also only do this if your will is going to be simple and straightforward. There are books and online advice available on how to write your own will.
It is generally advisable to use a solicitor or to have a solicitor check a will you have drawn up to make sure it will have the effect you want. This is because it is easy to make mistakes and, if there are errors in the will, this can cause problems after your death. Sorting out misunderstandings and disputes after your death could create legal costs and other problems for your family after you are gone.
Will-writing services are available to help you with creating your will. However, be aware that will-writing firms are not regulated by the Law Society so quality can vary. You can search for a will-writing firm belonging to The Institute of Professional Willwriters on their website.
If you are a member of a trade union, you may find that the union offers a free will writing service. A union will often use its own solicitors to undertake this work.
Is your will legal?
For your will to be legally valid, you must:
- be 18 or over
- make it voluntarily
- be of sound mind
- make it in writing
- sign it in the presence of 2 witnesses who are both over 18
- have it signed by your 2 witnesses, in your presence
A witness cannot be someone who you are leaving anything to in your will, or anyone married to somebody who you are leaving something to.
Signing can be witnessed remotely, for example by online video calling. If you do this then everyone must have a clear view of the person and the act of signing. It is also important that everybody signs the same document, not a copy.
If you make any changes to your will you must follow the same signing and witnessing process.
Citizen's Advice provide free information and advice on a wide range of topics, including pensions, wills, and finance. You can contact them on the phone, online, or in person.Citizen's Advice website
If you've been bereaved
Our Bereavement page contains advice and support for single parents who have lost a loved one.Bereavement support