New Year is traditionally the time for resolutions. Unfortunately few of us maintain them for long. So here are 10 simple things that can be done to improve family finances.
- Do you have direct debits and standing orders for subscriptions and memberships which you hardly use? If so, cancel them. When did you last change your energy provider or house and motor insurer? Switching could save you money.
- If you have a mortgage and credit cards, is your lender giving you the best deal? Ongoing loyalty is not always rewarded. 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.
- 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.
- 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.
If you have more than £85,000 in any one banking group, the excess will not be protected if the bank fails. Keep an eye on this limit and introductory rates, which often fall after a while.
- Review the provision you have made to prepare for the unwelcome. Life and ill health insurance should, as a minimum, cover any debts and mortgages and provide for ongoing income replacement.
Reviewing insurance needs and topping up cover could leave you less reliant on access to savings, so that savings could be invested 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.
- If you are employed and earn more than £10,000, your employer should by law offer a pension scheme. If you have not done so already, join it. If you have already joined, consider increasing your contributions. Some employers will match your extra contributions. From April employer and employee contributions will increase automatically to 5% from the employee and 3% from the employer.
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.
- 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. They automatically lapse on marriage and divorce.
Your pension plans are not part of your estate and not covered by your will. Update the nomination forms which state who you want to benefit from your private pensions and lump sum death benefit payments. Life policies may need to be put in trust or owned by a spouse to avoid inheritance tax on any payout.
- Make a list of all your assets and liabilities. If you have lost savings accounts they may be traceable via mylostaccount.org.uk. The Government can access funds in dormant accounts, these are defined as any account where there has not been a transaction for 3 years or more.
Pensions from previous employments can be traced via www.gov.uk/find-pension-contact-details.
- Review your pensions. Since 2015 pension plans can be accessed more flexibly and left on death tax efficiently. If yours are older than this, review them to see if they need updating to take advantage of the new rules. But some older plans may include valuable guarantees which could outweigh the benefits of pension flexibility.
Charges for managing funds could be lower under new plans, especially if your plans were established some time ago, generally charges have come down. Saving money on charges will help boost your retirement fund.
Is the investment fund still right for you? This will depend upon your objectives and time frame before retirement and whether you have other guaranteed sources of retirement income.
- 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 Tax Saving Tips 2019 and Get The Taxman to Pay For Christmas.
If you have no time to do these things or don’t know how to, simply ask your financial adviser for a review. All aspects of your finances can be incorporated in a long term financial plan which can be easily updated from time to time.
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. A pension is a long term investment. The fund value may fluctuate and can go down. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning or will writing.
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