Vivian Slattery

This is a saying that I always think should apply to all aspects of our lives, including our savings. Although I think this rule is always key, it could be argued that with the interest rate at an all time low it’s even more relevant at this time.

So as an adviser how do I believe you can be smarter with your finances? As many of us have time on our hands due to the lockdown I thought I would write a checklist of some of the things you could consider, especially with the end of the tax year looming when many of the allowances for this year come to an end. Here are a couple of key questions I feel you should ask yourself:

Are my investments in the most tax efficient medium? Each of us have a number of different allowances and the tax treatment can also affect our rate of return. For example, pension contributions can attract tax relief and this in turn can enhance their returns, although it is also important to consider the tax treatment of withdrawals too.

Moving funds into a more tax efficient environment may not result in a gain that you can instantly see, but in the long term may enhance your returns. For example, you may have funds in Unit Trusts which are not in an ISA wrapper. It could be beneficial to do what is known as a “Bed and ISA” which would allow you to take the funds tax free at a later stage. Care needs to be taken as Unit Trusts are subject to Capital Gains tax on their disposal but there is currently a Capital Gains tax free allowance which could be utilised.

The ISA allowance is another one you should consider utilising. One of the benefits is that it can help build up for more tax efficiency at a later stage.

Am I utilising my personal allowance? This I feel is especially relevant when you are drawing funds from a pension, to help minimise your tax. But it may not be just the personal allowance that needs to be considered, it could be utilising other tax bands if you know in the future that your tax band could increase.

Manipulating our savings to maximise our returns may not be straightforward and seeking professional advice may help. I have often said that I feel my key role is being a sounding board. We offer a number of alternative ways to access our services safely during this lockdown, including video and voice call. We offer a free without obligation consultation so it may also be a good time to utilise this if you currently have some spare time on your hands.

*This is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice. The impact of taxation (and any tax reliefs) depends on your circumstances.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

Well here we are into the New Year and I am sure it’s not quite the start we had all hoped for. I think the expression “Sometimes things have to get worse before they get better” comes to mind. However, many of us do have time on our hands at weekends with limited places we can venture to. So it could be a good time to organise finances – as I have noted before, having a project is so important for our mental health.

Often an individual’s second biggest asset after property is their workplace pension scheme, or as it is sometimes called an ‘Occupational Scheme’. This could either be a ‘Defined Benefit’ scheme (‘Final Salary’) or a ‘Defined Contribution’ scheme. A ‘Defined Benefit’ provides a guaranteed income for life and will have a set retirement age, whereas with a ‘Defined Contribution’ scheme your employer and usually yourself pay a portion of your wages into your Pension with the aim to build up a pot of money for your retirement.

The question to ask yourself, if you do have a workplace scheme, is how much understanding do you have of yours and when was the last time you reviewed it? Your paperwork should clarify which one you have and if in any doubt do ask your employer.

Defined Contribution schemes
As these do not have guarantees they need more monitoring, your choice of Pension funds can make a big difference to the final amount. We often see individuals who have accumulated Pensions they have not reviewed, and they are usually invested in a ‘Default Fund’ which is designed to fit all, to meet the needs of both younger and older employees. The question would be: is this the most suitable for you?

Many people underestimate how much fund performance can differ. Most Pension schemes offer a range of other funds and we would suggest you ask your employer for a list of available funds and then compare these to the one yours is in. However the performance of a fund is not the only factor, it’s also important to consider the risk profile and diversification of a fund. For example, an individual fund may have a better performance but it will not be right to switch your whole pension into it as this may not match your risk profile, and would not have the diversification we would recommend. So during this difficult time this could be an ideal time to look at your Pension. If you need help we do offer a free without obligation consultation so why not pick up the phone and give us a call.

Financially, the coronavirus has affected each of us differently. For some it has been tough and very difficult. There are also those whose income has not been affected and who, due to the lockdown, have not being spending as much on leisure activities. These individuals have managed to accumulate funds, so I thought I would take this opportunity to run through some ideas on how to make the best use of this.

Firstly, these uncertain times are clearly not yet over. You should first make sure that you have funds which are readily accessible. So what would my recommendation be for funds on short term deposit?

Well, I am very keen on premium bonds. Interest rates that savers can enjoy are influenced by the Bank of England base rate (BBR). The base rate was reduced at the beginning of March to 0.1% which is the lowest level ever in the history of the bank, adversely affecting the interest rate on your savings. The reason why I think premium bonds are attractive is that they work on the principle that the interest the bond holder would have received is pooled and then distributed as prizes to lucky winners selected at random. You can ask for your stake to be returned at anytime. The amount we would recommend an individual has on deposit would vary but for many it would be between £5,000 to £10,000.

The next consideration would be to pay off any outstanding liabilities, starting with those with the highest rate of interest. Check whether there are any penalties and if so, whether there is a portion you can repay without incurring these. If there any funds left over then you should look at tax efficient investments such as ISAs and Pensions, utilising your allowances.

The other current consideration is fixing your mortgage if you currently have a variable rate. Although low interest rates are bad news for savers they are better news for borrowers. Many would argue that the only direction the Bank of England base rate could go is up and therefore it could be a very good time to obtain a fixed mortgage rate.

If you would like to discuss your savings or if you have any other areas of finance you need advice for we do offer a free without obligation consultation which is an opportunity to seek advice on any of your financial concerns. Contact us today to book an appointment.