Getting your finances into shape

Have you noticed all those people bounding around the local park in shiny new running gear this week?

Yes, it’s that time of year again, the fleeting days between the New Year’s resolution “I’ve got to get fit this year” (January 1st) and “I’m getting too old for this stuff” (January 10th).

While we resolve to focus on our physical fitness, let’s not forget it’s also the perfect time to think about our ‘financial fitness’. January, the time for new beginnings, is the perfect time to take a look at our financial planning as well.

With repeated lockdowns and requests that we work from home, many of us might have put off thinking about our finances in 2020, but we’d suggest having a financial review sooner rather than later. A comprehensive financial plan has many building blocks, and like any building, it’s not truly stable until all the blocks are in place.

Let’s just consider pensions as one example

A pension is the centrepiece of retirement planning, but it needs to be constantly managed so that it continues to work as hard as possible. If life circumstances change, it’s always a good idea to make sure your pension is up to date.

Many of us had prolonged periods at home last year, and perhaps it turned our minds to thoughts of early retirement. We can help you determine if you have enough to do so, how much you would have to live on under various scenarios, and of course, how best to set it all up.

Choice and complexity

We have many more freedoms in using our pension savings these days, but with freedoms come choices, and with choices comes complexity. Advice has never been more, well, advisable.

On 6 April 2015, new pension rules made it possible to take lump sums directly from a pension from age 55 (rising to 57 in 2028). This means it’s possible to take a steady income from your pension, or to ‘draw down’ funds to reinvest.

Another alternative is to draw a single amount out, perhaps to clear your mortgage or spend as you wish. A slice of your savings taken out of your pension in this way has the less-than-zippy title of an Uncrystallised Funds Pension Lump Sum (whose anacronym ‘UFPLS’ sounds a bit like a breakfast cereal). 

These relatively new pension flexibilities do not, however, mean that the humble pensions annuity, which used to be compulsory, should be ignored. By using your savings to buy an annuity you have a guaranteed income for life, and the stability and security of that guarantee (as opposed to the risks involved in any reinvestment) is something that many people value.

Of course, it doesn’t have to be ‘all or nothing’ - if you are torn between annuity, drawdown and lump sum, you can mix and match, putting just a portion of your savings towards buying an annuity. 

Protection insurance

There are other building blocks that could slot into your rounded financial plan: do you need life insurance, or do you need critical illness insurance, in case your working life is interrupted by a major health setback? Or if you have these, perhaps it’s time to make sure they’re set at the right amount and don’t need topping up?

The pandemic has alerted many people to the fact that we’re all vulnerable and that anything can happen at any time, which means now might be as good a time as any to make sure everything’s in good shape.

Spring cleaning

Perhaps you’ve been tidying all that paperwork up and sorting out the admin? It may be that you’ve come across bits and pieces of filing you’re not sure about keeping. No one wants to hold on to things that take up space, but neither do we want to throw things out that may be important! If you’re not sure of what’s essential and what’s not or if you’ve come across something you’re not sure about – fire it across and we can take a look.

There’s no better feeling than being able to have a good clear out – but if you, it’s always a good idea to shred personal paperwork first to protect yourself from identity theft.

We hope this have given you some ideas to think about when it comes to getting organised for the year ahead.

If you’re ready to chat, why not change out of your tracksuit, have a nice bowl of UFPLS, and then give us a ring?