I was speaking to a friend of mine the other day, yes I do have some, and asked him what he was doing for Christmas this year. He replied that he was going to Australia to watch the Ashes and then proceeded to explain in great detail his plans. I commented that the trip had obviously taken a lot of planning as he was visiting three cities, playing golf as well as watching cricket.
His response was that he had been saving for two years and planning the itinerary for the same length of time. The cost of the trip would be around £7000.
I don’t tell this story to make you jealous, rather that when I asked him whether he spent as much time planning his financial future he said NO!
His response is typical of many people and so I thought it worthwhile to provide some food for thought.
Ten tips to help with financial planning:
- Develop a plan so that you’re clear on what your financial goals are and how you’re going to achieve them.
- Keep your plan under review and make changes when it’s appropriate.
- Always keep track of your savings, particularly your pension, so you know to top-up earlier on if you realise you aren’t saving enough to achieve your goals.
- Make sure your money is invested in the investments that reflect your attitude to risk. Keep this under review particularly as you get closer to the time when you intend to retire.
- Keep an eye on the Lifetime Allowance (£1.25m from 6 April 2014) and whether you are likely to breach this limit and risk a hefty tax charge. Remember the Lifetime Allowance may reduce further before you’re ready to take your pension.
- Remember to take the state pension into account when you work out how much extra income you will need. It’s important to start saving for your retirement early to maximise the time your money is invested.
- Remember that, in most cases, if you are a basic-rate tax payer, for every £80 you invest in a pension it is automatically topped up by £20 tax by the Government.
- If you are a higher-rate tax payer, then you can receive higher-rate tax relief on your contributions – don’t miss out, and remember to claim this through your tax return. If you’re investing through your workplace, you don’t need to do this as payments are deducted from your salary before tax.
- If you have more than one pension plan, then consider bringing them all together into one pot to make it easier to see how your pension is doing. But before doing so, make sure you are not giving up important benefits such as defined benefits, ‘with profits’ bonuses and enhanced tax-free cash.
- Consolidating your investments may mean lower annual charges, and you could also benefit from a discount for having a bigger investment pot.
As experts in financial planning we can help you make the right decisions for you and your family.
Lyndhurst Financial Management Limited.
Authorised and Regulated by the Financial Conduct Authority.