Money Makeover for 2018

January 2018
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The beginning of a new year is traditionally the time for new resolutions. Unfortunately, few of us possess the fortitude to maintain them for a full 12 months. So here are 10 simple things that can be done to improve family finances.

1. Look at your current spending. Analyse your current account. Do you have direct debits and standing orders for subscriptions and memberships which you hardly use? If so, cancel them.

2. If you have debts like a mortgage and credit cards, is your current lender giving you the best deal? Ongoing loyalty to an existing lender is not always rewarded with their best offers. If you can pay less elsewhere, be prepared to move. Often giving notice that you are shopping around will reveal a better deal from your existing lender.

3. If you always pay off your credit card in full each month, switching to a card which offers cash back or rewards when you use it will save you money.

4. Review your rainy day account. This should be enough to cover a minimum of 3 to 6 months outgoings. Depending upon what other savings and insurance you have, you may need to set aside more in easy access accounts.

Once this safety net is adequate, review your savings accounts regularly to ensure the interest rate offered remains competitive. If you have more than £85,000 in any one banking group, the excess will not be protected if the bank fails.

5. Review the provision you have made to prepare for the unexpected. Life and ill health insurance should as a minimum cover any debts and mortgages as well as provide for ongoing income replacement.

Reviewing insurance needs and topping up personal cover could leave you less reliant on access to savings, so that savings could be made with longer term aims in mind, knowing that the "what if" scenarios are provided for.

If you have given up smoking for 12 months or more, many insurers will offer lower premiums, so rearranging cover can save money too.

6. If you are employed and earn more than £10,000 p.a. your employer should by law offer a pension scheme and automatically enrol you into it. If you have are already enrolled, consider increasing your contributions. Some employers will match your extra contributions. Tax relief at the highest rate you pay, is also usually available. This can mean your own pension savings can be worth much more than the net income you forego.

If you are self employed put some funds aside for your retirement savings. You will usually get tax relief on the amount saved up to £40,000 pa or 100% of taxable profits, if lower.

7. Make a will. Without this, you cannot be sure that your dependants or intended beneficiaries will be adequately provided for.

Wills should be reviewed every few years to ensure that they still meet your wishes and the needs of your family.

Your pension plans do not form part of your estate and are not covered by your will. You should review the nomination forms which state who you want to benefit from your private pensions and the scheme rules of any defined benefit pensions you own.

8. Make a list of all your assets and liabilities. If you have savings accounts you have lost they may be traceable via mylostaccount.org.uk From 2018 the Government will start to access funds in dormant accounts, these are defined as any account where there has not been a transaction for 3 years or more.

If you have pensions from previous employments they can be traced via www.gov.uk/find-pension-contact-details.

9. New rules on how you can withdraw money from private pensions and how they can be left to others, after your death, apply to most private pensions arranged since 2015. If yours are older than this, review them to see if they need updating to take advantage of the new flexibility. Some older plans may however include valuable guarantees which could outweigh the benefits of pension flexibility.

Charges for managing funds could also be higher than under new plans, especially if your savings and pension plans were established some time ago, as generally charges have come down. Saving money on charges will help improve the value of your retirement fund.

Is the investment fund you are invested in right for you? This will depend upon your objectives and time frame before retirement and whether you have guaranteed sources of retirement income elsewhere.

10. Is your tax code correct? Unless nothing has changed, it may not be.  Use the tax efficient savings schemes available and claim all the allowances and reliefs, to which you are entitled, see our blog post 'New Year Tax Tips' for more information.

If you have no time to do these things or don’t know how to, a simple solution is to ask your financial adviser for a review. All these aspects of your finances can be incorporated in a long term financial plan which can be easily updated from time to time.

Kay Ingram
Director of Public Policy, LEBC

Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment or product for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. The Financial Conduct Authority does not regulate tax planning. Tax rates and allowances may change in future.

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