Time for a FINANCIAL HEALTH CHECK?

Lee Wood APFS

Taking the time to plan ahead for your financial future can have a positive impact in many ways. It can provide clarity of thought and set in motion a defined plan to organise your financial affairs, which can enable you to look ahead to the future with confidence. Whilst there are many aspects to a financial plan that are dependent on an individual’s circumstances, we look at some of the more common ways you can give your finances a health check.

According to recent research carried out by Canada Life, half of the UK population has not made a Will. Whilst uptake in the older generations is understandably higher, one in three people aged over 55 do not have a Will in place. These statistics are alarming, as dying without a Will can place an additional burden on loved ones at a difficult time, and potentially lead to difficult decisions when it comes to guardianship of children or how assets are dealt with.

By writing a Will you can leave clear instructions on matters such as funeral arrangements, or how possessions are to be distributed, which can ease the burden on family members. Dying without a Will also leaves no named executor to deal with the estate, and family members or other individuals will need to decide amongst themselves who will be appointed as administrator. We recommend using a Solicitor to prepare a Will that is drafted to reflect your wishes, as they can also provide expert advice and guidance where needed.

Another key area is the need to ensure that adequate protection is in place to provide a financial safety net in the event of the death of a family member.

The risks of not arranging suitable life cover are substantial, as this could potentially leave an outstanding mortgage for those left behind to deal with, or mean that the loss of an income could lead to financial hardship for surviving family members.

There are many options to consider when arranging life cover, in respect of whether the insurance would pay out a lump sum or regular payments in the event of a claim, the amount of sum assured, and the need to reach a decision about the policy term. Speaking to an independent adviser can help consider which of these options are appropriate to your circumstances.

Most people find retirement planning a daunting process. The options open at the point of retirement can be confusing and this is often compounded when individuals hold a number of different pensions built up through their working life. This is a common problem, as each employer provides a workplace pension through different schemes. In addition, those who are self-employed may well have paid into a personal pension too. Holding multiple plans can not only make assessment of the value and performance of the accumulated pension funds more difficult, it can also lead to higher costs.

The performance of pension investments is likely to have the biggest impact on the level of income available in retirement. All pension schemes need to provide a default investment option, into which pension savings will be invested, unless an alternative is selected by the individual. Default investment strategies tend to produce an average investment performance over the longer term and constructing a bespoke portfolio of investments can often result in improved performance. We would, however, always recommend any decision to vary an investment strategy is taken in conjunction with an independent financial adviser and any actions taken be reviewed regularly.

The decision to combine deferred pensions into a single plan can aid clarity and help establish a cohesive strategy across your pension savings. It can also make it easier to plan how income is drawn in retirement and allow tax-efficient decisions to be reached. However, this course of action isn’t right for everyone. Some schemes provide valuable benefits, such as guaranteed growth or annuity rates, which need to be carefully evaluated before any action is taken.

Following the series of base interest rate hikes over the last 18 months, interest rates on cash deposit are now more attractive than they were a year ago. If you haven’t already, now would be a good time to review existing savings accounts and check the rate of interest you are receiving. If it is unattractive compared to other savings rates available on the market, then vote with your feet and look to alternatives offering more competitive rates.

We appreciate that modern life is busy and taking time out to consider your financial future may not seem a priority; however, not planning ahead can have serious consequences for your future financial health. Engaging with a holistic independent financial planner can help focus your planning, and help you make the most of your finances by establishing a comprehensive financial plan, from protecting loved ones in the event of unforeseen circumstances to building a retirement plan for the future.

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