Almost half of pension savers in their 50s and 60s have not considered how they will access their retirement pot, according to new research by the Institute for Fiscal Studies.

Its analysis suggests lots of us are heading towards retirement unprepared, with little consideration for the financial challenges ahead.

Life is busy, so it is understandable that many people put off taking stock of their finances until they absolutely must. But that does not leave any scope for remedying problems, which is why a financial MOT in your 50s is an essential pitstop for all savers.

WHY IT’S IMPORTANT TO REVIEW YOUR FINANCES IN YOUR 50S

At this juncture, you may not have a clear idea of precisely when you will retire, but it is a good idea to put some flags in the ground to mark out a rough landing zone. Having a retirement date to aim for can focus your mind on what needs to be done to get there, while also allowing flexibility for adjustments along the way.

You can use an online pension calculator to find out what sort of income you are currently on course for in retirement and fill in any gaps if necessary. It is quite common for people in their 50s to find they have an extra bit of disposable income, because some everyday costs like mortgages and raising children are dropping out of the equation.

That opens the possibility of playing catch-up with your pension if needed. At this stage in life, you are probably approaching peak earnings, which means the tax relief you can get on pension contributions should be considered too.

CONSIDER HOW YOU WILL DRAW YOUR PENSION

You might also want to consider how you will draw your pension because this will have implications for how you invest in the approach to retirement. If you want to draw your pension out as cash, then you probably need to start thinking about gradually switching it into less risky assets, such as cash itself.

If you are going to buy an annuity, then you could invest in bonds to provide a hedge against annuity rates, as they move in the opposite direction. On the other hand, if you intend to keep your pension invested after retirement to provide you with an income, then you might want to continue with a more risk-hungry approach.

However, you may well decide to dial down the risk a bit, because your pension will likely be a reasonable size at this point, so you might want to find a new balance between growth and capital preservation.

THINK ABOUT YOUR INVESTMENTS TOO

It is not just your pension which deserves some attention in a mid-life financial MOT either. Your other investments come into play as well, including ISAs. Often there is a shift in risk appetite as people approach retirement, so it is worth re-evaluating your risk tolerance and the capacity for loss.

If you wish to reduce risk in your pension or other investments, you can diversify out of equities and into bonds, which are now providing meaningful yields in the age of higher interest rates. Alternatively, you can turn to multi-asset funds which combine a mixture of shares and bonds, and other assets too.

As you hit your 50s, you may also be coming to terms with an unpleasant fact of life – your own mortality. Often this can function as a trigger for a mid-life crisis involving learning to play the electric guitar, taking surfing lessons, or becoming a yoga instructor. All of those are fantastic diversionary tactics, but you might also want to give some thought to your finances in case the worst should happen.

In between learning how to play Stairway to Heaven and striking a lotus pose, you might find time to ensure your will is up-to-date and accurately reflects your wishes. You should also consider inheritance tax planning. The rules surrounding this are complex, but there are legitimate ways to reduce the potential liability, such as gifts, trusts, life insurance, and pensions.

Your 50s should be a time when you are hopefully beginning to feel financially comfortable and charting a clear path to retirement. A mid-life MOT at this point can really help to iron out niggles and set some targets to aim for. There can be quite a lot to consider here, often with a large amount of money on the line, so if you feel uncertain on how to proceed, this is an area where a qualified financial planner might be worth their weight in gold.

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