Would you pass a mid-life financial MOT?

Couple Paying Bills
Couple Paying Bills

Depositing coins and money into a pink piggybank with retirement written in white chalk on a blackboard
Depositing coins and money into a pink piggybank with retirement written in white chalk on a blackboard

In a report on state pensions last week, John Cridland recommended that people in their 50s should be offered a 'financial MOT'.

Cridland suggested it could come in the form of an online tool accessed through the pensions dashboard. It would give people a chance to discover whether they are making enough provision for their future, and could recommend lifestyle choices.

"The mid-life MOT can act as a useful trigger to encourage people to take stock. We recognise that different people will have different needs depending on their circumstances," he wrote.

"For some, a light-touch approach will be sufficient, through the provision of appropriate information. Others may need more personalised and in-depth support, for example if they have complex health needs or if they have a lower skill level."

But would you pass a mid-life financial MOT?

First, and most fundamentally, you should be living within your income. Credit cards, personal loans and car finance schemes can disguise your true financial position. It makes sense to pay off all your debts before attempting to save for the future; if you can't, at least consolidate them somewhere where you won't be paying punitive rates of interest.

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If you do have spare cash, think about where you keep it. These days, many current accounts pay good rates of interest. However, many people have spare cash languishing in current or savings accounts that pay peanuts, so it's important to keep an eye on the rate you're getting. Similarly, many ISAs offer great starting rates that plummet after a certain period.

Many people don't even know what pensions they have, let alone how much they are worth. And most people in mid-life are pretty pessimistic, with two-fifths of those between 45 and 54 telling the Skipton building society that they don't think they'll have enough for the lifestyle they want.

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But it's possible to improve your situation - many pensions allow you to make additional voluntary contributions that could make a big difference to your eventual payout. And consolidating all your pensions in one place will make them easier to keep track of, and could make more sense financially too. You can track down a lost pension using the Pension Tracing Service.

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How long is your mortgage term - and when do you hope to retire? If the dates don't match up, you could be in trouble. However, many mortgages allow you to make overpayments that could reduce your mortgage term. And it's always worth shopping around for a new mortgage, specially if the value of your house has gone up, as you may be eligible for a better deal.