2014 – Time to get your finances into shape
The New Year often brings resolutions that last for a while and then somehow get overtaken by events; that annual diet, the idea that a ‘dry January’ would be good, the promise to never play Monopoly with your estate agent brother-in-law again.
One resolution that you should not let fall by the wayside is to review your personal finances early in the year – and definitely before the end of the 2013/2014 tax year on 5th April. Now is the time to look at your mortgage, insurance, savings, investments and pension and make sure that your money is working as hard as it can to bring you and your family good financial health.
Which New Year’s resolution have you made?
- To make full use of my 2013-14 ISA tax allowance
- To maximise my savings and investments
- To review my pension performance and contributions
- To switch my mortgage to a cheaper deal
- To review the insurance I need to protect myself, my home and family
Let’s look at each of those resolutions in turn. Don’t forget to seek the advice of an independent financial advisor to ensure that you are making the best decision available from the choices you have.
ISA tax allowances
Have you taken full advantage this year of all the tax-efficient ways of investing your hard-earned money? For example, for 2013-14, the maximum ISA contribution limit is £11,520 (rising to £11,880 from 6th April) half of which can be saved in cash. You cannot carry over your allowance from one year to the next; if you do not use it, then you lose it. For more information on how the ISA allowance works for cash and stocks and shares, read our blog on the subject.
Maximising your savings and investments
Experts currently predict that the Bank of England Bank Rate – also known as the ‘Base Rate’ – will not exceed 1 per cent for the next 3 years. This is obviously bad news for savers who have suffered from years of record low interest rates and for whom keeping money as ‘cash’ has proved to be an unrewarding strategy. Have you considered investing in more adventurous assets to keep your return on investment above the inflation rate, thus receiving a positive rate of interest which does not erode your capital? Last summer we wrote a blog on ‘how to get a return on your savings in a low interest world’. Its suggestions are still very relevant as the interest rate and inflation environments have not changed significantly, despite the fall in the unemployment rate.
Reviewing your pension performance and contributions
Do you know how much your pension is worth? A study last year by Duncan Lawrie Private Bank found that more than 1 in 3 people (38%) who have a private pension have never reviewed their plan. The research also discovered that nearly one in ten (9%) of people in the UK are not sure of how many pensions they currently have. The importance of keeping track of where your pension is, who is managing it and how much it is worth (both in terms of the current ‘pot’ and the income that the pot could buy you on retirement) cannot be overstated. It will define the kind of lifestyle you have as a pensioner.
Here is our 3 step plan for making sure that your pension is helping you achieve your retirement goals:
- Check how many pensions you have and where they are held. Are they private pensions or employer schemes? Track down the paperwork.
- Check how much your pensions are worth, both in terms of the pension ‘pot’ and the income that this is likely to generate for you in retirement.
- Check the annual management and fund manager charges and do something about them if they are too high.
Switching your mortgage to a cheaper deal
Is your current mortgage deal ending – or has it ended recently? Perhaps you are on a lender’s variable rate and would like to know if there is a cheaper rate out there? Maybe you would like to fix your rate for peace of mind? With the Government’s Funding for Lending last year and its Help to Buy Equity Loan and Mortgage Guarantee schemes this year, there is definitely increased competition once again amongst mortgage lenders. If you have not remortgaged for a while, on the assumption that there is no better rate out there for you, then it could pay to think again. Why not contact an independent mortgage advisor and see if you could save money, taking into account any charges you might incur for switching.
Alternatively, if you are thinking of downsizing to lower your bills, investing in a Buy to Let property or are a First Time Buyer, looking to get onto the property ladder, then now is the time to act, as the UK mortgage market is set for growth in 2014.
Reviewing your insurance to protect yourself, your home and your family
You probably have buildings and contents insurance already, but does it cover your property sufficiently, especially given the recent storms and flooding? How about income protection, critical illness cover or life assurance? When was the last time you sat down and reviewed how well you are protecting your family against the risks that we all face in life?
There are at least five reasons why you should consider protection insurance:
- It pays out 90% of the time
- It’s not that expensive
- The State will not always provide
- Your employer will not necessarily look after you
- It might happen to you
If you’d like to know more about protection insurance, please read our latest blog on the subject.