Fortified for the 50s

By CLARE HALL
Updated: 19:00 EST, 13 May 2000

For many people, their fifties turn out to be the crisis decade. Statistics show that this is the age when both divorce and redundancy are most common. It is also the time when many people wake up to the reality of a looming retirement.

And David Wright, an adviser with Johnstone Douglas in Croydon, Surrey, warns: 'If you don't face financial facts when you turn 50, you are heading for the danger zone.'

He advises fiftysomethings to take a long, hard look at their finances. First, they must work out whether they will have enough to live on in retirement. A vital step is to ask for a forecast of your state pension from the Department of Social Security. Do this by filling out a BR19 form, available from local DSS offices.

Wright says that most fiftysomethings who go through this process have a 'nasty shock' and discover that they will not have enough for a comfortable retirement. But there is good news as well. For many, this can be an affluent decade with the mortgage paid off, the children grown up and off their hands and the possibility of inheriting money from parents or relatives. It all means more disposable income to save for retirement.

Luckily, contribution limits for personal pensions are higher in your fifties. Anyone in a company pension scheme should think seriously about topping it up through a tax-free Additional Voluntary Contribution pension plan.

Next, take a look at investments. For those planning to retire in the next few years, it is worth transferring stock market investments into less risky products such as corporate bonds, gilt-edged stocks or with-profits bonds, so they will not lose badly if stock markets fall. And if you come into some money, for example from a maturing endowment policy or an inheritance, it is a good idea to pay off the mortgage to cut outgoings in retirement.

Alternatively, seek advice on how to invest the money to build an investment portfolio that will produce a solid retirement income. Anyone facing divorce or redundancy should also seek advice on how best to stretch a lump sum through retirement.

Derek and Vivienne Browning discovered this three years ago when within months they were each made redundant from their jobs as insurance brokers. Derek, 57, now works as a part-time driver and Vivienne has retired. But the couple from Lawford, Essex, are optimistic that their finances will provide them with a reasonable retirement.

The Brownings saved much of their earnings in a Norwich & Peterborough savings account and use this to help pay the bills. They also bought a range of with-profits bonds with their redundancy payouts, and their mortgage has been paid off.

They also have several tax-free Isas and two Tessas that are about to mature. Derek worked for the same broking firm for 30 years and he has built up a reasonable pension. But he says: 'I have frozen it and I don't want to take it until it is absolutely necessary.' Vivienne, 54, had built up a more modest pension and took it immediately.