Financial advice: Ten top tips for pensioners

Retirement – it’s supposed to be the time in your life when you can sit back, relax and enjoy the fruits of your labours. However, for some people, retirement is anything but relaxing. It can be a stressful time when financial worries take over, and with the financial world in turmoil, things are not going to be any easier.

If this sounds familiar, there are steps you can take to improve your long term financial situation, giving you more money in your retirement.

The following tips should be able to help you if you are retired:

Make sure you get the maximum return for your pension savings

When you turn your pension pot into an income by buying an annuity it is a once and forever decision.

However, you do not have to accept the offer made by the company holding your savings. Shop around for the best deal. There are many options available such as – annuities that rise with inflation (RPI), annuities that rise by 3pc annually, With-Profits annuities (where income grows with annual bonuses), or Unit Linked annuities (where the fund stays invested to provide growth but there is also a guaranteed lifetime income).

Experts estimate that two out of five people could boost their retirement income by disclosing existing medical conditions or lifestyle issues that are likely to affect how long they live.

Switch savings and investments to ensure the least amount of tax is paid on the interest

Married couples need to ensure that savings and investments are in the name of the person paying the lowest rate of tax.

The difference in net interest on £50,000 at 6per cent between a basic rate tax-payer and a non-taxpayer is £600 a year.

Consider Permanent Interest Bearing Shares as an investment

These are special shares issued by building societies, which pay a fixed rate of interest. The market is very small but yields of 8per cent are available.

Consider renting out a room

Homeowners can earn up to £4,250 a year - or just over £354 a month - tax-free by doing this.

For standard-rate taxpayers that is equivalent to pre-tax earnings of £5,313, or for higher-rate taxpayers it represents gross earnings of £7,083 a year. And letting rooms in this way does not affect the capital gains exemption for owner-occupied properties.’

Unlock the equity in your home

Equity release is not suitable for everyone but can provide either a lump sum or extra income. Beware, however, that it will reduce what you can leave in a will.

You should seek independent advice from someone who has access to all the schemes available and look for the Ship logo which identifies the best schemes.

Downsize your home and/or move to a cheaper area

Selling your current property and moving to a smaller, cheaper home is probably the most efficient way to gain access to a lump sum of money.

There has been a dramatic increase in the number of retirement homes available but although the initial cost may be attractive you have to remember there will be annual service charges.

In some cases these have trebled in the past 20 years.

Avoid the personal allowance tax trap

If you are over 65 you are entitled to a higher personal tax allowance. For the under 65s it stands at £5,435, but rises to £9,030 at 65 and £9,180 at 75.

If, however, your taxable income is at or over £21,800 a year, the higher personal allowance is reduced by £1 for every £2 of income over this threshold.

So, a 65-year-old with an income of £28,990 will not benefit from the higher personal allowance on offer. A 75-year-old would only benefit if their taxable income fell below £29,290.

People who live on their own pay less council tax

Homes with just one person living in them qualify that person for a 25per cent reduction in their council tax. This could save you on average £624 a year.

Up to £2,000m of council tax benefit went unclaimed in 2006-7 with up to 2.2m older people missing out.

Make sure you are receiving all the benefits to which you are entitled

Up to £5 billion in benefits goes unclaimed by older people each year. One-in-three of those eligible for pension credits fails to claim and this is worth on average an extra £1,352 a year.

The Citizens Advice website www.adviceguide.org.uk holds more information about benefits and tax credits. Further information is also available from Age Concern, free phone 0800 00 99 66 or visit www.ageconcern.org.uk .

Or, for bespoke advice tailored to your specific needs, you may want to consider enlisting the help of an independent financial advisor, who will be able to help you make the most of your assets.

Get your free and discounted entitlements

Everyone over 60 is entitled to free prescription medicines. Instead of buying your drugs over the counter, ask your doctor to prescribe them and get them free.

Over 60s can also get a pass allowing them free transport on buses anywhere in the country and for £24 you get a pass giving you a 34 per cent discount on national rail fares.